STUDY PAPER ON PORTFOLIO MANEGMENT OF MAHINDRA & MAHINDRA GROUP 2010-2011

FOR

MASTER DEGREE
IN FINANCE

SUBMITED BY: MANOJ SINGH

IN GUIDANCE OF:

CERTIFICATE

This is to certify that the project report entitled Study paper on Portfolio management of MAHINDRA & MAHINDRA GROUP (Automobile sector) has been carried out by MR MANOJ SINGH in partial fulfillment of the requirement for award of Masters Degree in Human Resource Management from University of Rajasthan, Jaipur.

The conclusions in this report are based on the data collected during the course of study. To the best of my knowledge and belief, this work has not been submitted to the department earlier.

(Dr. M.P.BANSAL) PROJECT GUIDE

ACKNOWLEDGEMENT

I would like to express my debt and gratitude and sincere thanks to my wellwishers and with whom I worked, interacted and whose insights and thoughts encouraged me in widening my knowledge.

I am deeply indebted to my guide Mr. Mukesh Dubey for providing me valuable suggestion and guidance. He has always been an inspiring force to me.

I am grateful to Lt. Col. P. Tulsiyan vrc (Retd.) Personnel Manager, Jaipur for giving the valuable information about this company and helping me in getting this project through. He encouraged and inspired me to prepare this report correctly and by making himself available whenever I was in need for his help.

I must also not forget to thank Goddess Saraswati who showered her mercy and kind support.

(MANOJ SINGH)

CONTENTS
1. Certificate from Project Guide 2. Certificate from Mahindra & Mahindra 3. Acknowledgement 4. Chapter I  Concept of PORTFOLIO MANEGMENT  Mahindra & Mahindra, Company Profile  Hard Facts of Mahindra & Mahindra  Personnel Philosophy of HRM  Mahindra & Mahindra Core Values 5. Chapter III TRAINING & DEVELOPMENT POLICIES  Concept of Training  Methods of Training  Training in Mahindra & Mahindra  T NAT Programme
6. Chapter-

IV

MANEGMENT OF M&M LTD.

 Capital Structure  Board of directors

 Key Executives

7. Chapter v FANENCIAL STATEMENTS OF M&M LTD.     Income Statement Balance- Sheet Ratio Analysis Cash-Flow Statement

8. Chapter- VI  New Accounting Policies  NSE & BSE CHARTS OF VAROATIONS IN SHARES. 9. Chapter- vii REPORTS BY ADMINISTRATION  Auditors report  Directors report 10. Chapter-viii RECOMMONDATION CONCLUTION BIBLIOGRAPHY

CHAPTER

I
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Concept of Portfolio Management

Portfolio Management is used to select a portfolio of new product development projects to achieve the following goals: y y y Maximize the profitability or value of the portfolio Provide balance Support the strategy of the enterprise

Portfolio Management is the responsibility of the senior management team of an organization or business unit. This team, which might be called the Product Committee, meets regularly to manage the product pipeline and make decisions about the product portfolio. Often, this is the same group that conducts the stage-gate reviews in the organization. A logical starting point is to create a product strategy - markets, customers, products, strategy approach, competitive emphasis, etc. The second step is to understand the budget or resources available to balance the portfolio against. Third, each project must be assessed for profitability (rewards), investment requirements (resources), risks, and other appropriate factors. The weighting of the goals in making decisions about products varies from company. But organizations must balance these goals: risk vs. profitability, new products vs. improvements, strategy fit vs. reward, market vs. product line, long-term vs. short-term. Several types of techniques have been used to support the portfolio management process: y y y Heuristic models Scoring techniques Visual or mapping techniques

The earliest Portfolio Management techniques optimized projects' profitability or financial returns using heuristic or mathematical models. However, this approach paid little attention to balance or aligning the portfolio to the organization's strategy. Scoring techniques weight and score criteria to take into account investment requirements, profitability, risk and strategic alignment. The shortcoming with this approach can be an over emphasis on financial measures and an inability to optimize the mix of projects. Mapping techniques use graphical presentation to visualize a portfolio's balance. These are typically presented in the form of a two-dimensional graph that shows the trade-offs or balance between two factors such as risks vs. profitability, marketplace fit vs. product line coverage, financial return vs. probability of success, etc.

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The chart shown above provides a graphical view of the project portfolio risk-reward balance. It is used to assure balance in the portfolio of projects - neither too risky nor conservative and appropriate levels of reward for the risk involved. The horizontal axis is Net Present Value; the vertical axis is Probability of Success. The size of the bubble is proportional to the total revenue generated over the lifetime sales of the product. While this visual presentation is useful, it can't prioritize projects. Therefore, some mix of these techniques is appropriate to support the Portfolio Management Process. This mix is often dependent upon the priority of the goals. Our recommended approach is to start with the overall business plan that should define the planned level of R&D investment, resources (e.g., headcount, etc.), and related sales expected from new products. With multiple business units, product lines or types of development, we recommend a strategic allocation process based on the business plan. This strategic allocation should apportion the planned R&D investment into business units, product lines, markets, geographic areas, etc. It may also breakdown the R&D investment into types of development, e.g., technology development, platform development, new products, and upgrades/enhancements/line extensions, etc. Once this is done, then a portfolio listing can be developed including the relevant portfolio data. We favor use of the development productivity index (DPI) or scores from the scoring method. The development productivity index is calculated as follows: (Net Present Value x Probability of Success) / Development Cost Remaining. It factors the NPV by the probability of both technical and commercial success. By dividing this result by the development cost remaining, it places more weight on projects nearer completion and with lower uncommitted costs. The scoring method uses a set of criteria (potentially different for each stage of the project) as a basis for scoring or evaluating each project. An example of this scoring method is shown with the worksheet below

With the significant investments required to develop new products and the risks involved, Portfolio Management is becoming an increasingly important tool to make strategic decisions about product development and the investment of company resources. In many companies, current year revenues are increasingly based on new products developed in the last one to three years. Therefore, these portfolio decisions are the basis of a company's profitability and even its continued existence over the next several years

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PORTFOLIO MANEGMENT PIE CHART

Once the organization has its prioritized list of projects, it then needs to determine where the cutoff is based on the business plan and the planned level of investment of the resources available. This subset of the high priority projects then needs to be further analyzed and checked. The first step is to check that the prioritized list reflects the planned breakdown of projects based on the strategic allocation of the business plan. Pie charts such as the one below can be used for this purpose

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MAHINDRA AND MAHINDRA COMPANY PROFILE

Mahindra & Mahindra Limited (M&M) is the flagship company of the Mahindra Group, which has a significant presence in key factors of the Indian economy. A consistently high performer, M&M is the one of the most respected companies in the country.

Set up in 1945 to make general-purpose utility vehicles for the Indian Market, M&M soon launched out into manufacturing agricultural tractors and light commercial vehicles (LCVs). The company later expanded its operations from automobiles and tractors to secure a significant presence in many more important sectors.

An organizational restructuring exercise in 1994 arising from a business process re-engineering programme resulted in the core activities of the manufacturing
13

utility and light commercial vehicles and agricultural Tractors remaining with the flagship company.

All other activities were spun off into separate entities and organized under business group, each headed by a president. This group is in the areas of hospitality, trade and financial services, automotive components, information technology, telecom and infrastructure development.

Today M&M has two main operating divisions: The automotive division manufactures utility, light commercial vehicles and three wheelers. The farmequipment division makes agricultural tractors and other farm implements. M&M employs more than 12,600 people and has six state-of-the-art manufacturing facilities spread over 5,00,000 square meters .M&M has also set up satellite/skid plants for tractors in six locations .It has 45 sales officers that are supported by a Network is connected to the company s plants by an extensive IT infrastructure.

M&M s outstanding manufacturing and engineering skills allow it to constantly innovate and launch new products for the Indian market. Proof of this expertise is the launch t of the Daimler Chrysler group) to import and assemble the Willys Jeep for the Indian market. M&M began producing light commercial vehicles (LCVs) in 1965.

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Ever since its inception, the company has focused on developing its own manufacturing capabilities. As a result of its relentless ambition in this direction, M&M began indigenously producing vehicles within a short span of the collaboration agreement with Willys. Over the years the Mahindra brand in utility vehicles has come to represent high quality, ruggedness, durability, reliability, easy maintenance and operational economy. These are the qualities that have endeared the vehicle to individuals as well as institutions such as the Indian Armed Forces. M&M enjoys a market share of more than 50 percent in this segment.

M&M farm equipment division originated through the formation of a joint venture in 1963 between the company and the US based International Harvester Inc. named the International Tractor Co. of India; this enterprise strengthened the roots of the green revolution that was then beginning to sweep the country. The launch of the company s high performance tractors played a vital role in the mechanization of Indian agriculture. The venture was dissolved in 1978 and the business merged with M&M s organizational restructuring in 1994, it was called the farm equipment division, and it became the manufacturing hub for a wide range of tractors and other agricultural implements targeted at farmers in India and abroad. With plants at Mumbai and Nagpur in Maharashtra, the farm equipment division makes more than 85,000 tractors annually. The division s facility at Kandivalli acquired the coveted ISO-9001 certification in 1996, and its today the single largest facility of its kind in the world. The plant at Nagpur, which

15

is QS-9000-certified, produces hydraulic units and various agricultural implements, apart from tractors .The of the Bolero, Scorpio, a new-generation utility vehicle, and the Arjun, a sophisticated agricultural tractor.

The company s commitment to technology-driven innovation is reflected in the setting. The setting up of the Mahindra Research Valley, a facility that will house, under one roof, the company s engineering research and product development wings.

The M&M philosophy of growth is centered on a belief in people. As a result, the company has put in place initiatives that seek to reward and retain the best talent in the industry. M&M is also known for its progressive labour management practices.

In the community development sphere, the company has implemented several programmes that have benefited the people and institutions in its areas of operations. M&M s automotive division was created in 1994 following an organizational restructuring but its origins go back to 1954.That was when the company entered into collaboration with Willys Overland Corporation (now a part of the Daimler Chrysler group) to import and assemble the Willys Jeep for the Indian market. M&M began producing light commercial vehicles (LCVs) in 1965.

16

Ever since its inception, the company has focused on developing its own manufacturing capabilities. As a result of its relentless ambition in this direction, M&M began indigenously producing vehicles within a short span of the collaboration agreement with Willys. Over the years the Mahindra brand in utility vehicles has come to represent high quality, ruggedness, durability, reliability, easy maintenance and operational economy. These are the qualities that have endeared the vehicle to individuals as well as institutions such as the Indian Armed Forces. M&M enjoys a market share of more than 50 percent in this segment.

M&M farm equipment division originated through the formation of a joint venture in 1963 between the company and the US based International Harvester Inc. named the International Tractor Co. of India; this enterprise strengthened the roots of the green revolution that was then beginning to sweep the country. The launch of the company s high performance tractors played a vital role in the mechanization of Indian agriculture. The venture was dissolved in 1978 and the business merged with M&M s organizational restructuring in 1994, it was called the farm equipment division, and it became the manufacturing hub for a wide range of tractors and other agricultural implements targeted at farmers in India and abroad. With plants at Mumbai and Nagpur in Maharashtra, the farm equipment division makes more than 85,000 tractors annually. The division s facility at Kandivalli acquired the coveted ISO-9001 certification in 1996, and it s today the single largest facility of its kind in the world. The plant at Nagpur, which is QS-9000-certified, produces hydraulic units and various agricultural

17

implements, apart from tractors .The division has been the market leader for 16 consecutive yrs. In the highly competitive Indian market, and it is currently the fourth largest in the world in terms of units sold. Products have earned the goodwill and trust of the 6, 00,000 Indian farmers and the Mahindra tractors has come to be recognized as a symbol of productivity and performance, In addition to dominate the domestic market, M&M s farm equipment wing has also found significant success internationally with exports to the United States, South Africa, Sri Lanka, Bangladesh, Nepal, Zimbabwe and several European countries.

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HARD FACTS of M&M:

 Over 50 years of services to the nation.  Sales Rs.4,000 crore (F99-F00)  Over 13,000 employees (Approx.)

Market leader in tractors & automobiles sector for last 18 years

 One out of every 3 tractor in India is a Mahindra Tractor  Over 8 lakh tractors sold  Wide range of tractors to suit every farmer  Exports to several countries in the world

Largest sales and service network

 25 area offices in 13 states across the country  Over 455 dealers, 100 authorized service centers and 92 stockists supporting customers all over India

Excellent manufacturing facilities:

 Most sophisticated machinery for tractor manufacturing

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 Maximum parts manufactured in-house compared to any other tractor  Focus on quality and value to customers through BPR, TQM, Quality circle, etc.  ISO 9001 & QS 9000 quality certification implying consistency in quality.

PERSONNEL PHILOSOPHY OF M&M

To work with zeal, enthusiasm and effectiveness.

To treat each employee as an important person in the organization.

To recognize that each employee contributes to and that each depends on the accomplishments of the whole group.

To deal with each employee fairly and with respect for his human dignity.

To provide a fair opportunity to all group

men, women, religion,

linguistic and caste groups to work and progress.

To gain employee goodwill and loyalty.

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To know what workers want and expect from their work.

To recognize the rights and responsibilities of each functional group.

To build harmonious and co-operative human relations.

To believe in collective bargaining and participative management.

M&MS CORE PURPOSE:

Indians are second to none in the world. The founders of our nation passionately believed this. Company will prove them right by believing in them and by making Mahindra & Mahindra ltd. Knownworldwide, for the quality, durability and

reliability of its products and services.

M&MS CORE VALUES

GOOD CORPORATE CITIZENSHIP: As in the past we will continue to seek long term success which is in alignment with our country s needs. We will do this with our compromising ethical business standards.

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PROFESSIONALISM: We have always sought the best people for the job, and given them the freedom and the opportunity to grow. We will continue to do so. We will support innovation and well-reasoned risk taking. But will demand performance.

CUSTOMER FIRST: We exist and prosper only because of the customer. We will respond to the changing needs and expectations of our customers, speedily, courteously and effectively.

QUALITY FOCUS: Quality is the key to delivering value for money to

our

customers. We will make quality a driving value in our work, in our products and in our interactions with others. We will do it first time right . DIGNITY OF THE INDIVIDUALS: We will value individual dignity, uphold the right to express disagreement and respect the time and efforts of others. Through our actions, we will nurture fairness, trust and transparency.

These values are the compass that will guide our actions, both personnel and corporate.

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CHAPTER II

TRAINING AND DEVELOPMENT POLICIES

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A. Training: - Training starts after the recruitment of the employees. Training is the process through which employees are made capable of doing the job prescribed to them. According to Flippo Training is the act of increasing

the knowledge and skill of an employee for doing a particular job . According to Beach Training is the organized procedure by which people

learn knowledge and skills for a definite purpose .

The purpose of training is to achieve a change in the behavior of those trained and to enable them to do their jobs in a better way. The trainees will acquire new manipulative skills, technical knowledge, problem solving ability or attitude etc. Training is not a one step process but it is a

continuous or never ending process. Training makes newly recruited workers productive in the minimum of time.

In short, training is the act of improving or updating the knowledge and skill of an employee for performing a particular job.

B. Methods of Training: - There are two principal methods of employees training which are used by the company.

I. On the Job Methods: The worker by these methods learns to master the operations involved on the actual job situations under the

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supervision of his immediate boss who has to carry the primary burden of conducting this training various methods of on the job training are as follows :  On Specific Job On specific job method is the most

common form of training for all individuals. A person can learn when he is put on a specific job. He can develop skills for doing the job in a better way over the period of time.

 Position Rotation

In this, a person is given jobs in various

departments of the organization. The major objective of job rotation training is to broaden the background of the trainee. He can learn the working of various sections and departments of the organization.

 Apprenticeship

Apprenticeship is like understudy in which

the trainee is put under the supervision of person who may be quite experienced in his field.

II. Vestibule School

The concept of vestibule school is that people will

learn and develop skills while working in the situations similar to what they will face after they are put on actual jobs. Organization establishes training centers to train people for skilled work particularly in production department. When the job requirement is such that people cannot be absorbed directly, they are put in such training

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center.Off

The Job: In these methods, trainees have to leave their

work place and devote their entire time to the development objectives. In these methods development of trainees is primarily and any useable work produced during training is secondary. Following training techniques are used off the job:  Special Courses and lectures These are knowledge based

training programme; an effort is made to expose participants to concept and theories, basic principles and pure and applied knowledge in any subject area. Mahindra and Mahindra have regular instructors assigned to their training and development department. Sometimes an external instructor may also be invited to give some training through special lecture. For example An

instructor is invited from Factory and Boiler office to give some special lectures.

 Conferences

In this method, the participants pool their

ideas and experience in attempting to arrive at improved methods of dealing with problems which are faced by them at their work place. For intensive discussion on the various subjects of the conference, many small groups are constituted.

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 Brainstorming

This is the method of stimulating trainees to

creative thinking. This approach is developed to reduce inhibiting forces by providing for a maximum of group participation and a minimum of criticism. A problem is posed andideas are invited. But this technique is not used by Mahindra & Mahindra Group. 2. Sensitivity Training Sensitivity training is a small group interaction

under stress in an unstructured encounter group which requires people to become sensitive to one another s feelings in order to develop reasonable group activity.

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C. Training & Development practices in M&M:

 Mahindra and Mahindra take up training and development. It has its own training center. Training needs of various levels of employees are assessed on the basis of manpower planning and deliberations between training manager and employees for assessing training needs.

Keeping in view the large number of its employees and their training needs, Mahindra & Mahindra organizes the following types of training programmes (1) T NAT, (2) Orientation courses, (3) Need bases

seminars, (4) lecture meetings.

These courses are meant for junior management level, management trainees and supervisors.

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TRAINING NEED ASSESSMENT TOOL PROGRAMME (T NAT)

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PURPOSE: The training assessment tool (T

NAT) provides information about NAT process is a series of

the employee s training needs in his job. The T

sequential steps that allows to compare what employee knows or can do (Ability Level) with what he needs to know or does on his job (Job need level).

The training needs assessment tool is precisely what its name implies a vehicle for analyzing and documenting an individual s training requirements as compared to his or her present knowledge or skill level for performing a specific job. The goal of the analysis is to identify individuals training needs and develop an action plan for satisfying those needs. The T NAT provides an easily understood format that

allows managers and employees to compare their perceptions and go on to develop a priority list of training activities.

Since 1981 more than 10,000 supervisors and managers have uses T guide their on the job training relationship. Some of the uses include: -

NAT to

 Helping bosses and employees to pinpoint weaker skill/knowledge areas and develop individual training plans.  Assessing the career development needs of people undergoing job retraining and placement.  Assisting counselors to select from a menu of training seminars and workshops offered within the context of a broader curriculum.

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 Identifying the general training needs of a specific employee classification such as supervisory personal.  Facilitating the creationof a priority list of development activities following performance appraisal.  Guiding the mission, goals and strategy development for large training depts.

The T

NAT has been divided into five distinct parts. The sequencing of these

parts provides a logical approach to identifying training needs and training activities: PART I: - SKILL/KNOWLEDGE LISTING PART II: - RATING ABILITY LEVEL AND JOB NEED LEVEL PART III: - COMPLETING THE T NAT PART IV: - INTERPRETING THE T NAT PART V: - PREPARING YOUR TRAINING ACTION PLAN

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PART I: - SKILL KNOWLEDGE LISTING

The beginning point for any analysis of training needs is an identification of what actually is required to perform a specific job. And up to date, comprehensive

job description may or may not be available. If one is available, it could be used as a reference. If none is available, as it often the case, the job incumbent and/ or his/ her manager can develop the list through discussion.

The skill/ knowledge list may be prepared in a number of different ways: the employee develops the list on his/ her own; the employee develops with the managers input; the employee and the manager jointly prepare the list. The decision as to who will be involved will probably depend on the employee s experience and training for the job under consideration.

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PART II: RATING ABILITY LEVEL & JOB NEED LEVEL

In this section the job incumbent and / or the boss are being asked two questions. What is the present ability level of the job incumbent for each skill / knowledge listed in Part I. / What is the job need level required for satisfactory performance of each skill / knowledge? The answers to these questions will reveal a discrepancy (training will be required or a match (no training will be required). Ratings are based on a numerical scale from o to 9.

1.

Ability level indicators include: (a) (b) (c) How the incumbent is viewed by others Trainee ___________ expert. How much supervision is required constant ___________ none. How the job incumbent feels about his skills dissatisfied ___________ Satisfied. (d) How often errors are made frequently ___________ rarely.

2.

Job need level indicators include: (a) How often the skill is used on the job seldom ___________ frequently. (b) How essential a part of the job is the skill? Not essential ___________ essential (c) How visible is the use of skill

Rarely visible___________ highly visible.

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PART III:COMPLETING THE T-NAT

A grid combining the Ability level and Job Need level dimensions has been constructed (The Ability Need level is placed on the vertical axis. The Job Need level is on the horizontal axis) the purpose of the grid (T-NAT) is to aid in interpretation of the ratings assigned to each skill / knowledge. The rating for each Ability level & Job Need level would be plotted as shown further. Assume that Ability = 2 and Job Need = 7. The grid would be marked as the intersection of those two points. It should then be labeled with its identifying skill / knowledge number from Part I. The number is sufficient to identify the skill / knowledge item being plotted.

Instructions: Using the ratings from Part II for ABILITY LEVEL and JOB NEED
LEVEL. Plot the intersection of those points on the grid below for each of the SKILL / KNOWLEDGE areas listed. As you plot each point on the grid, label it with its identifying SKILL / KNOWLEDGE number from PART I.

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PART IV: INTERPRETING THE T-NAT

Instructions: - Compare your completed T- NAT from part III to the diagram below. Observe where the points you plotted on your T-NAT lie in relation to the shaded areas below. (Note: - you may find it useful to re-plot your T-NAT points on the grid below) The meaning of each shaded areas is as follows. AREA OF CRITICAL TRAINING NEED JOB NEED LEVEL is high and ABILITY LEVEL is low, because the need for the skill / knowledge on the job is much higher than the level of ability, a critical training need is indicated. AREA OF MODERATE TRAINING NEED ABILITY LEVEL and JOB NEED LEVEL generally match this indicates no training is required to be able to do the job adequately AREA OF CAREER FROWTH Because ABILITY LEVEL is at least equal to, if not greater than JOB NEED LEVEL. This indicates than no training in this skill/knowledge area is required for the job. It may indicate career growth. 8 7 6 5 4 3 2 1 0 0
9
H

8
I

7
M O D E

6 5 4 3 2 1 0 1 2 3 4 5 6 7 8

L O

LOW

HIGH

MODERATE

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PART V:

PREPARING TRAINING ACTION PLAN

After interpreting the Training Need Assessment Tool (T-Nat) the next step is to prepare a training action plan; which is based on the training needs.

After all these activities or steps; which means after the T-NAT an evaluation of the training is done that whether training programme was effective or not and to which extent. There is a Training Evaluation Form which is to be filled immediately after the training programme. This form gets the information about the Training program s relevance, Training programmer design Training Programmed faculty and Administration and Programme results.

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PART V: TRAINING ACTION PLAN

Instructions:In the sections below, list your training needs as indicated by your
T-NAT interpretation grid from part IV. List your most critical training needs first, your moderate training needs next, and areas you wish to pursue for your career growth last. For each item listed, identify activities you will complete to develop your skill / knowledge and estimate a completion date for each activity listed.

Refer to the completed example in the shaded area below for guidance in completing your personal training action plan.

Urgency codes are: C = Critical;

M = Moderate;

CG = Career Growth

URGENCY CODE

SKILL / KNOWLEDGE NUMBER 3 Prepare budget requests

TRAINING ACTIVITY
(Brief description of how training need will be met.
a. Attend Budget Training course

EST. DATE OF COMPLETION

b. Assist manager to prepare request c. Read manual section 1 1103 Budget

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38

TRAINING EVALUATION FORM

(To be filled immediately after attending training programme)

Given below is a feedback form designed to measure the effectiveness of the training programme you have just attended. Please be as open and clear in your comments and ratings as possible. Name: ____________________ Division: __________________ Token No. : ____________________ PU: _____________

Title of Training ProgrammeAttended: ______________________________ Dates(s) of the programmeFrom: To:

Kindly tick mark ( ) in the appropriate column. L Low; H High A. 1. 2. 3. 4. 5. 6. Programme Relevance : I was well informed about the objectives of this course I had the prerequisite knowledge / skills for this course The course content was relevant to my job The course has effect on my immediate tasks & problems. The course contributed to my personal development The course lived up to my expectations

B. 1.

Programme Design : The course objectives were made clear to me

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2. 3. 4. 5.

All topics covered were given adequate weightage The programme was interactive and participative The programme pace was appropriate The teaching methods used were stimulating

C. 1. 2. 3.

Programme Faculty & Administration : The instructor was well prepared with course contents The instructor was helpful in resolving queries and doubts The training facility was comfortable & I had everything I needed. Programme Results : I accomplished the objectives of this course. I will be able to use what I have learnt in this course. Overall rating of the course

D. 1. 2. 3.

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CHAPTER III MANAGEMENT OF M&M LTD.

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CAPITAL STRUCTURE OF MAHINDRA & MAHINDRA LTD.:From Year To Year Class Of Share Authorized Capital (Rs.Cr) 600.00 375.00 275.00 275.00 175.00 175.00 175.00 175.00 175.00 175.00 175.00 175.00 175.00 92.80 92.80 90.00 90.00 90.00 45.00 45.00 45.00 20.00 10.00 10.00 7.50 4.00 4.00 1.25 0.15 1.10 0.50 Issued Capital (Rs.Cr) 278.82 245.74 238.03 233.40 116.01 116.01 116.01 116.01 110.48 110.48 103.37 101.79 101.79 58.80 58.80 50.33 36.21 35.34 19.26 19.26 19.08 11.45 5.72 4.42 4.41 3.17 1.32 0.55 0.02 0.15 0.15 Paid Up Shares in (Nos) 278821265 245741813 238032707 233399584 116008599 116008599 116008599 116008599 110484380 110484380 103367553 101794033 101793723 2800000 56004912 50331156 36206162 35337047 19264046 19264046 19075880 11445528 5722764 4424562 4410825 3168000 1320000 550000 16809 3000 3000 Paid Up Face Value 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 1.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 500.00 500.00 Paid Up Capital (Rs.Cr) 278.82 245.74 238.03 233.40 116.01 116.01 116.01 116.01 110.48 110.48 103.37 101.79 101.79 0.28 56.00 50.33 36.21 35.34 19.26 19.26 19.08 11.45 5.72 4.42 4.41 3.17 1.32 0.55 0.02 0.15 0.15

2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1997 1996 1995 1994 1994 1993 1992 1991 1987 1984 1983 1979 1977 1973 1969 1967 1958 1955 1954 1954 1953

2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1997 1996 1995 1995 1994 1993 1992 1989 1985 1984 1980 1979 1974 1973 1968 1967 1958 1955 1955 1954

Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share

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BOARD OF DIRECTORS INCLUDING CHAIRMAN, VICE PRESIDENT,AND MANY OTHER DEPARTMENT DIRECTORS LIST AS FOLLOWING :-

S.No 1 2 3 4 5 6 7 8 9 10 11 12

Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr.

Name A K Nanda Keshub Mahindra R K Kulkarni Nadir B Godrej Anupam Puri A S Ganguly M M Murugappan Narayanan Vaghul Deepak S Parekh Bharat Doshi Arun Kanti Dasgupta Anand G Mahindra

Designation Additional Director Chairman / Chair Person Director Director Director Director Director Director Director Executive Director Nominee Director Vice Chairman & Mng.Director

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KEY EXECUTIVES DIRECTORS OF MAHINDRA & MAHINDRA LTD.:S.No 1 2 3 4 5 6 7 8 9 Name Mr.Rajeev Dubey Mr.Hemant Luthra Mr.Ulhas N Yargop Mr.Pawan Goenka Mr.Uday Y Phadke Mr.A K Nanda Mr.Narayan Shankar Mr.Bharat Doshi Mr.Anoop Mathur Designation President President President President President President Co.Secretary & Compl. Officer Group Chief Financial Officer President

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BRANCHES INCLUDING MANUFATURING PLANTS IN ALL OVER INDIA OF MAHINDRA & MAHINDRA :S.No. Location Type Address Mahindra Towers, 5th Floor, Dr. G.M. Bhosale Marg, P.K. Kurne Chowk, Mumbai , Maharashtra - India PinCode :400018 Phone :022-24905624,24975074,, Fax :022-24900833, Gateway Building, Apollo Bunder Mumbai , Maharashtra - India PinCode :400001 Phone :022-22021031,,, Fax :022-22875485, Near E S Depot Agra Road Ghatkopar Mumbai , Maharashtra - India PinCode :400077 Phone :,,, Fax :, Nasik Nasik , Maharashtra - India PinCode :422403 Phone :,,, Fax :, Akurli Road Kandivali (East) Mumbai , Maharashtra - India PinCode :400067 Phone :,,, Fax :, Nagpur Nagpur , Maharashtra - India PinCode: 0 Phone :,,, Fax :, Jaipur Jaipur, Rajasthan - India PinCode: 0 Phone :,,, Fax :, Igatpuri Igatpuri, Maharashtra - India PinCode: 0 Phone :,,, Fax :, Haridwar Haridwar, Uttaranchal - India PinCode: 0 Phone :,,, Fax :,
Pune. Pune, Maharashtra - India PinCode: 0 Phone :,,,

Shares Department

Registered Office

Factory/plant

Factory/plant

Factory/plant

Factory/plant

Factory/plant

Factory/plant

Factory/plant

10

Factory/plant

11

Factory/plant

3, Ferguson Road Mumbai , Maharashtra - India PinCode :400018

45

12

Corporate Office

13

Branch Office

14

Branch Office

15

Branch Office

16

Branch Office

17

Branch Office

18

Branch Office

19

Branch Office

20

Branch Office

Mahindra Tower No.13 Worli Mumbai , Maharashtra - India PinCode :400018 Phone :022-24931441,24975176,, Fax :022-24936235, 7, Dr. Ishaque Road (Old KYD Street) Kolkata , West Bengal - India PinCode :700016 Phone :,,, Fax :, Mahindra Towers 2 - A Bikini Cama Place New Delhi , Delhi - India PinCode :110066 Phone :,,, Fax :, Mahindra Towers, First Floor, 17/18 , Pattulous Road Chennai (Madras) , Tamil Nadu - India PinCode :600002 Phone :,,, Fax :, Hall & Anderson Building Park Street Kolkata, West Bengal - India PinCode: 0 Phone :,,, Fax :, Dhun Bldg., 827, Anna Salai Chennai (Madras) , Tamil Nadu - India PinCode :600002 Phone :,,, Fax :, Jeevan Deep Building, No.8, Parliament Street New Delhi , Delhi - India PinCode :110001 Phone :,,, Fax :, Jagtap Park, 6E, Rambai Ambedkar Road, Pune , Maharashtra - India PinCode :411001 Phone :,,, Fax :, Raheja Chambers, First Floor, 12 Museum Road. Bangalore , Karnataka - India PinCode :560001 Phone :,,, Fax :,

46

CHAPTER IV FINANCIAL STATEMENTS OF M&M LTD.

47

48

INCOME STATEMENT OR PROFIT AND LOSS A/C

Income statement, also referred as profit and loss statement (P&L), earnings statement, operating statement or statement of operations,[1] is a company's financial statement that indicates how the revenue (money received from the sale of products and services before expenses are taken out, also known as the "top line") is transformed into the net income (the result after all revenues and expenses have been accounted for, also known as the "bottom line"). It displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues, including write-offs (e.g., depreciation and amortization of various assets) and taxes.[1] The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported. The important thing to remember about an income statement is that it represents a period of time. This contrasts with the balance sheet, which represents a single moment in time. Charitable organizations that are required to publish financial statements do not produce an income statement. Instead, they produce a similar statement that reflects funding sources compared against program expenses, administrative costs, and other operating commitments. This statement is commonly referred to as the statement of activities. Revenues and expenses are further categorized in the statement of activities by the donor restrictions on the funds received and expended. The income statement can be prepared in one of two methods.[2] The Single Step income statement takes a simpler approach, totaling revenues and subtracting expenses to find the bottom line. The more complex Multi-Step income statement (as the name implies) takes several steps to find the bottom line, starting with the gross profit. It then calculates operating expenses and, when deducted from the gross profit, yields income from operations. Adding to income from operations is the difference of other revenues and other expenses. When combined with income from operations, this yields income before taxes. The final step is to deduct taxes, which finally produces the net income for the period measured.

Usefulness and limitations of income statement

Income statements should help investors and creditors determine the past financial performance of the enterprise, predict future performance, and assess the capability of generating future cash flows through report of the income and expenses. However, information of an income statement has several limitations: y

Items that might be relevant but cannot be reliably measured are not reported (e.g. brand recognition and loyalty).

49

y y

Some numbers depend on accounting methods used (e.g. using FIFO or LIFO accounting to measure inventory level). Some numbers depend on judgments and estimates (e.g.depreciation expense depends on estimated useful life and salvage value).

Items on income statement Operating section

y

Revenue - Cash inflows or other enhancements of assets of an entity during a period from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major operations. It is usually presented as sales minus sales discounts, returns, and allowances. Expenses - Cash outflows or other using-up of assets or incurrence of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's ongoing major operations. o General and administrative expenses (G & A) - represent expenses to manage the business (officer salaries, legal and professional fees, utilities, insurance, depreciation of office building and equipment, office rents, office supplies) o Selling expenses - represent expenses needed to sell products (e.g., sales salaries, commissions and travel expenses, advertising, freight, shipping, depreciation of sales store buildings and equipment) o Selling General and Administrative expenses (SG&A or SGA) - consist of the combined payroll costs (salaries, commissions, and travel expenses of executives, sales people and employees), and advertising expenses a company incurs. SGA is usually understood as a major portion of non-production related costs, opposing production related costs such as raw material and (direct) labor o R & D expenses - represent expenses included in research and development o Depreciation - is the charge for a specific period (i.e. year, accounting period) with respect to fixed assets that have been capitalized on the balance sheet.

Non-operating section
y

Other revenues or gains - revenues and gains from other than primary business activities (e.g. rent, patents). It also includes unusual gains and losses that are either unusual or infrequent, but not both (e.g. sale of securities or fixed assets) Other expenses or losses - expenses or losses not related to primary business operations.

Irregular items
They are reported separately because this way users can better predict future cash flows - irregular items most likely will not recur. These are reported net of taxes. y

Discontinued operations are the most common type of irregular items. Shifting business location, stopping production temporarily, or changes due to technological improvement do not qualify as discontinued operations.

50

Extraordinary items are both unusual (abnormal) and infrequent, for example, unexpected natural disaster, expropriation, prohibitions under new regulations. Note: natural disaster might not qualify depending on location (e.g. frost damage would not qualify in Canada but would in the tropics). Changes in accounting principle are, for example, deciding to depreciate an investment property that has previously not been depreciated. However, changes in estimates (e.g. estimated useful life of a fixed asset) do not qualify.

INCOME STATEMENT OF MAHINDRA & MAHINDRA

Mar ' 09 Income : Operating Income Expenditure Material Consumed Manufacturing Expenses Personnel Expenses Selling Expenses Administrative Expenses Expenses Capitalized Cost Of Sales Operating Profit Other Recurring Income Adjusted PBDIT Financial Expenses Depreciation Other Write offs Adjusted PBT Tax Charges Adjusted PAT Non Recurring Items Other Non-Cash adjustments Reported Net Profit Earnings Before Appropriation Equity Dividend Preference Dividend Dividend Tax Retained Earnings 13,125.98 11,310.37 9,921.34 8,136.59 6,594.69 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05

9,365.00 174.05 1,024.61 575.34 937.56 -42.83 12,033.73 1,092.25 305.98 1,398.23 134.12 291.51 0.00 972.60 199.69 772.91 63.87 4.07 836.78 3,807.00 278.83 0.00 33.23 3,494.94

7,814.71 164.68 853.65 804.51 561.66 -46.49 10,152.72 1,157.65 364.05 1,521.70 87.59 238.66 0.59 1,194.86 303.40 891.46 211.91 0.00 1,103.37 3,228.45 282.61 0.00 38.48 2,907.36

6,930.76 134.00 666.15 635.10 466.22 -47.10 8,785.12 1,136.22 404.87 1,541.09 19.80 209.59 0.33 1,311.37 350.10 961.28 126.30 -19.19 1,068.39 2,544.13 282.23 0.00 42.50 2,219.40

5,782.01 111.90 551.78 458.32 387.57 -26.53 7,265.04 871.54 195.82 1,067.36 26.96 200.01 0.28 840.12 242.40 597.72 259.38 0.00 857.10 1,853.50 243.97 0.00 34.22 1,575.31

4,655.24 100.65 464.25 369.72 317.79 -31.84 5,875.81 718.88 186.46 905.34 30.24 184.05 0.15 690.89 201.50 489.39 23.28 0.00 512.67 1,255.52 150.81 0.00 21.15 1,083.55

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BALANCE-SHEET
In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership or a company. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a "snapshot of a company's financial condition".[1] Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business' calendar year. A standard company balance sheet has three parts: assets, liabilities and ownership equity. The main categories of assets are usually listed first and typically in order of liquidity.[2] Assets are followed by the liabilities. The difference between the assets and the liabilities is known as equity or the net assets or the net worth or capital of the company and according to the accounting equation, net worth must equal assets minus liabilities.[3] Another way to look at the same equation is that assets equal liabilities plus owner's equity. Looking at the equation in this way shows how assets were financed: either by borrowing money (liability) or by using the owner's money (owner's equity). Balance sheets are usually presented with assets in one section and liabilities and net worth in the other section with the two sections "balancing." Records of the values of each account or line in the balance sheet are usually maintained using a system of accounting known as the double-entry bookkeeping system. A business operating entirely in cash can measure its profits by withdrawing the entire bank balance at the end of the period, plus any cash in hand. However, many businesses are not paid immediately; they build up inventories of goods and they acquire buildings and equipment. In other words: businesses have assets and so they cannot, even if they want to, immediately turn these into cash at the end of each period. Often, these businesses owe money to suppliers and to tax authorities, and the proprietors do not withdraw all their original capital and profits at the end of each period. In other words businesses also have liabilities.
Liabilities.
[12]

Public Business Entities balance sheet structure

Guidelines for balance sheets of public business entities are given by the International Accounting Standards Committee and numerous country-specific organizations. Balance sheet account names and usage depend on the organization's country and the type of organization. Government organizations do not generally follow standards established for individuals or businesses. If applicable to the business, summary values for the following items should be included on the balance sheet:[17]

52

Assets
Current assets

1. 2. 3. 4.

Cash and cash equivalents Inventories Accounts receivable Prepaid expenses for future services that will be used within a year

Fixed assets

1. 2. 3. 4.

Property, plant and equipment Investment property, such as real estate held for investment purposes Intangible assets Financial assets (excluding investments accounted for using the equity method, accounts receivables, and cash and cash equivalents) 5. Investments accounted for using the equity method 6. Biological assets, which are living plants or animals. Bearer biological assets are plants or animals which bear agricultural produce for harvest, such as apple trees grown to produce apples and sheep raised to produce wool.[18]

Liabilities
1. Accounts payable 2. Provisions for warranties or court decisions 3. Financial liabilities (excluding provisions and accounts payable), such as promissory notes and corporate bonds 4. Liabilities and assets for current tax 5. Deferred tax liabilities and deferred tax assets 6. Minority interest in equity 7. Issued capital and reserves attributable to equity holders of the Parent company 8. Unearned revenue for services paid for by customers but not yet provided

Equity
The net assets shown by the balance sheet equals the third part of the balance sheet, which is known as the shareholders' equity. Formally, shareholders' equity is part of the company's liabilities: they are funds "owing" to shareholders (after payment of all other liabilities); usually, however, "liabilities" is used in the more restrictive sense of liabilities excluding shareholders' equity. The balance of assets and liabilities (including shareholders' equity) is not a coincidence. Records of the values of each account in the balance sheet are maintained using a system of accounting known as double-entry bookkeeping. In this sense, shareholders' equity by construction must equal assets minus liabilities, and are a residual.

1. Numbers of shares authorized, issued and fully paid, and issued but not fully paid 2. Par value of shares 3. Reconciliation of shares outstanding at the beginning and the end of the period

53

4. 5. 6. 7.

Description of rights, preferences, and restrictions of shares Treasury shares, including shares held by subsidiaries and associates Shares reserved for issuance under options and contracts A description of the nature and purpose of each reserve within owners' equity

BALANCE-SHEET OF MAHINDRA & MAHINDRA LTD.

(Rs in Cr.) Mar ' 09 SOURCES OF FUNDS Owner's Fund Equity Share Capital Share Application Money Preference Share Capital Reserves & Surplus Loan Funds Secured Loans Unsecured Loans Total USES OF FUNDS Fixed Assets Gross Block Less : Revaluation Reserve Less : Accumulated Depreciation Net Block Capital Work-in-progress Investments Net Current Assets Current Assets, Loans & Advances Less : Current Liabilities & Provisions Total Net Current Assets Miscellaneous expenses not written Total Note : Book Value of Unquoted Investments Market Value of Quoted Investments Contingent liabilities Number of Equity shares outstanding (in Lacs) 272.62 0.00 0.00 4,959.26 981.00 3,071.76 9,284.64 239.07 0.00 0.00 4,098.53 617.26 1,969.80 6,924.66 238.03 0.00 0.00 3,302.01 106.65 1,529.35 5,176.04 233.40 0.00 0.00 2,662.14 216.68 666.71 3,778.93 116.01 0.00 0.00 1,881.93 336.82 715.80 3,050.56 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05

4,893.89 12.09 2,326.29 2,555.51 646.73 5,786.41

3,552.64 12.47 1,841.68 1,698.49 649.94 4,215.06

3,180.57 12.86 1,639.12 1,528.59 329.72 2,237.46

2,859.25 13.33 1,510.27 1,335.65 205.46 1,669.09

2,676.51 14.32 1,335.56 1,326.63 133.93 1,189.79

5,081.20 4,797.76 283.44 12.55 9,284.64 4,305.50 3,218.81 1,220.39 2,726.16

3,816.41 3,468.77 347.64 13.53 6,924.66 1,429.16 7,669.90 985.35 2,390.73

3,916.94 2,854.20 1,062.74 17.55 5,176.06 1,515.23 10,285.25 1,008.27 2,380.33

2,805.04 2,254.37 550.66 18.05 3,778.91 1,419.01 2,030.85 946.36 2,334.00

2,356.41 1,980.58 375.83 24.38 3,050.56 1,047.67 240.83 758.14 1,116.48

54

RATIO ANALYSIS
Financial ratio analysis is a fascinating topic to study because it can teach us so much about accounts and businesses. When we use ratio analysis we can work out how profitable a business is, we can tell if it has enough money to pay its bills and we can even tell whether its shareholders should be happy! Ratio analysis can also help us to check whether a business is doing better this year than it was last year; and it can tell us if our business is doing better or worse than other businesses doing and selling the same things. In addition to ratio analysis being part of an accounting and business studies syllabus, it is a very useful thing to know anyway! The overall layout of this section is as follows: We will begin by asking the question, what do we want ratio analysis to tell us? Then, what will we try to do with it? This is the most important question, funnily enough! The answer to that question then means we need to make a list of all of the ratios we might use: we will list them and give the formula for each of them. Once we have discovered all of the ratios that we can use we need to know how to use them, who might use them and what for and how will it help them to answer the question we asked at the beginning? At this stage we will have an overall picture of what ratio analysis is, who uses it and the ratios they need to be able to use it. All that's left to do then is to use the ratios; and we will do that step- by-step, one by one. Information>Financial Ratio Analysis> Which ratios will each of these groups be interested in?

DIFFERENT RATIOS BELONGS TO DIFFERENT PARTIES

On this page you should complete the table below (you can do this by printing it out). In the left hand column there is a list of interest groups one by one. Your job is to complete the right hand column by giving two or three examples of ratios they might be interested in. We have given an example of each to help you get started. When you've filled in the gaps you will appreciate that it gives us some ideas about the ratios that each of the users we have identified would be interested in looking at.
Interest Group Ratios to watch

Investors

Return on Capital Employed

55

Lenders

Gearing ratios

Managers

Profitability ratios

Employees

Return on Capital Employed

Suppliers and other trade creditors

Liquidity

Customers

Profitability

Governments and their agencies

Profitability

Local Community

This could be a long and interesting list

Financial analysts

Possibly all ratios

Environmental groups

Expenditure on anti-pollution measures

Researchers

Depends on the nature of their study

56

DIFFERENT RATIOS OF MAHINDRA & MAHINDRA LTD.

Mar ' 09 PER SHARE RATIOS Adjusted E P S (Rs.) Adjusted Cash EPS (Rs.) Reported EPS (Rs.) Reported Cash EPS (Rs.) Dividend Per Share Operating Profit Per Share (Rs.) Book Value (Excl Rev Res) Per Share (Rs.) Book Value (Incl Rev Res) Per Share (Rs.) Net Operating Income Per Share (Rs.) Free Reserves Per Share (Rs.) PROFITABILITY RATIOS Operating Margin (%) Gross Profit Margin (%) Net Profit Margin (%) Adjusted Cash Margin (%) Adjusted Return On Net Worth (%) Reported Return On Net Worth (%) Return On long Term Funds (%) LEVERAGE RATIOS Long Term Debt / Equity Total Debt/Equity Owners fund as % of total Source Fixed Assets Turnover Ratio LIQUIDITY RATIOS Current Ratio Current Ratio (Inc. ST Loans) Quick Ratio Inventory Turnover Ratio PAYOUT RATIOS Dividend payout Ratio (Net Profit) Dividend payout Ratio (Cash Profit) Earning Retention Ratio Cash Earnings Retention Ratio COVERAGE RATIOS Adjusted Cash Flow Time Total Debt Financial Charges Coverage Ratio Fin. Charges Cov.Ratio (Post Tax) COMPONENT RATIOS 3.81 10.43 9.41 2.29 17.37 16.33 1.40 77.85 65.57 1.11 39.60 40.23 1.56 29.94 24.04 37.29 27.65 59.63 70.69 29.10 23.91 63.99 71.61 30.39 25.40 66.22 72.28 32.45 26.30 53.46 65.14 33.54 24.67 64.87 74.48 1.06 0.90 0.83 14.60 1.10 0.86 0.74 12.49 1.37 1.31 1.01 13.42 1.24 1.21 0.83 11.13 1.19 1.10 0.78 10.66 0.83 0.77 56.34 2.85 0.62 0.59 62.63 3.22 0.53 0.46 68.39 3.14 0.40 0.30 76.62 2.85 0.60 0.52 65.49 2.47 8.32 6.10 6.22 7.92 14.80 16.03 12.36 10.23 8.12 9.45 9.68 20.61 25.51 19.64 11.45 9.33 10.34 11.34 27.28 30.33 26.09 10.71 8.25 10.28 9.57 20.77 29.78 23.17 10.90 8.10 7.56 9.93 24.79 25.97 24.32 28.35 39.04 30.69 41.39 10.00 40.07 191.45 191.90 481.48 170.32 37.29 47.30 46.15 56.16 11.50 48.42 180.87 181.39 473.09 168.36 40.38 49.20 44.88 53.70 11.50 47.73 147.98 148.52 416.81 135.66 25.61 34.19 36.72 45.30 10.00 37.34 123.29 123.86 348.61 109.86 43.83 60.33 45.92 62.42 13.00 64.39 176.77 178.05 590.67 158.02 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05

57

Material Cost Component(% earnings) Selling Cost Component Exports as percent of Total Sales Import Comp. in Raw Mat. Consumed Long term assets / Total Assets Bonus Component In Equity Capital (%)

70.15 4.38 5.26 1.39 0.63 62.58

70.41 7.11 7.81 1.59 0.63 71.36

69.92 6.40 7.18 1.97 0.50 71.67

72.33 5.63 6.24 1.86 0.53 73.09

73.22 5.60 5.14 2.41 0.52 47.06

CASH-FLOW STATEMENT OF M&M LTD

In financial accounting, a cash flow statement, also known as statement of cash flows or funds flow statement,[1] is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities. Essentially, the cash flow statement is concerned with the flow of cash in and cash out of the business. The statement captures both the current operating results and the accompanying changes in the balance sheet.[1] As an analytical tool, the statement of cash flows is useful in determining the short-term viability of a company, particularly its ability to pay bills. International Accounting Standard 7 (IAS 7) is the International Accounting Standard that deals with cash flow statements. People and groups interested in cash flow statements include:
y y y y y

Accounting personnel, who need to know whether the organization will be able to cover payroll and other immediate expenses Potential lenders or creditors, who want a clear picture of a company's ability to repay Potential investors, who need to judge whether the company is financially sound Potential employees or contractors, who need to know whether the company will be able to afford compensation Shareholders of the business.

Purpose
Statement of Cash Flow - Simple Example for the period 01/01/2006 to 12/31/2006 Cash flow from operations Cash flow from investing Cash flow from financing Net cash flow $4,000 $(1,000) $(2,000) $1,000

Parentheses indicate negative values

58

The cash flow statement was previously known as the flow of funds statement.[2] The cash flow statement reflects a firm's liquidity. The balance sheet is a snapshot of a firm's financial resources and obligations at a single point in time, and the income statement summarizes a firm's financial transactions over an interval of time. These two financial statements reflect the accrual basis accounting used by firms to match revenues with the expenses associated with generating those revenues. The cash flow statement includes only inflows and outflows of cash and cash equivalents; it excludes transactions that do not directly affect cash receipts and payments. These noncash transactions include depreciation or write-offs on bad debts or credit losses to name a few.[3] The cash flow statement is a cash basis report on three types of financial activities: operating activities, investing activities, and financing activities. Noncash activities are usually reported in footnotes. The cash flow statement is intended to [4]

1. provide information on a firm's liquidity and solvency and its ability to change cash flows in future circumstances 2. provide additional information for evaluating changes in assets, liabilities and equity 3. improve the comparability of different firms' operating performance by eliminating the effects of different accounting methods 4. indicate the amount, timing and probability of future cash flows
The cash flow statement has been adopted as a standard financial statement because it eliminates allocations, which might be derived from different accounting methods, such as various timeframes for depreciating fixed assets.

Cash flow activities

The cash flow statement is partitioned into three segments, namely: cash flow resulting from operating activities, cash flow resulting from investing activities, and cash flow resulting from financing activities. The money coming into the business is called cash inflow, and money going out from the business is called cash outflow.

Operating activities
Operating activities include the production, sales and delivery of the company's product as well as collecting payment from its customers. This could include purchasing raw materials, building inventory, advertising, and shipping the product. Under IAS 7, operating cash flows include: y y y y y y
[11]

Receipts from the sale of goods or services Receipts for the sale of loans, debt or equity instruments in a trading portfolio Interest received on loans Dividends received on equity securities Payments to suppliers for goods and services Payments to employees or on behalf of employees

59

Interest payments (alternatively, this can be reported under financing activities in IAS 7, and US GAAP)

Items which are added back to [or subtracted from, as appropriate] the net income figure (which is found on the Income Statement) to arrive at cash flows from operations generally include: y y y y

Depreciation (loss of tangible asset value over time) Deferred tax Amortization (loss of intangible asset value over time) Any gains or losses associated with the sale of a non-current asset, because associated cash flows do not belong in the operating section.(unrealized gains/losses are also added back from the income statement)

Investing activities
Examples of investing activities are y y y

Purchase or Sale of an asset (assets can be land, building, equipment, marketable securities, etc.) Loans made to suppliers or received from customers Payments related to mergers and acquisitions

Financing activities
Financing activities include the inflow of cash from investors such as banks and shareholders, as well as the outflow of cash to shareholders as dividends as the company generates income. Other activities which impact the long-term liabilities and equity of the company are also listed in the financing activities section of the cash flow statement. Under IAS 7, y y y y y

Proceeds from issuing short-term or long-term debt Payments of dividends Payments for repurchase of company shares Repayment of debt principal, including capital leases For non-profit organizations, receipts of donor-restricted cash that is limited to long-term purposes

Items under the financing activities section include: y y y y

Dividends paid Sale or repurchase of the company's stock Net borrowings Payment of dividend tax

60

CHAPTER

V
61

NEW ACCOUNTING POLICIES FOR MAHINDRA & MAHINDRA LTD.

Year End : 200903 (A) Fixed Assets : (a) (i) Fixed Assets are carried at cost less depreciation except as stated in (ii) below. Cost includes financing cost relating to borrowed funds attributable to the construction or acquisition of qualifying fixed assets up to the date the assets are ready for use. Where the acquisition of fixed assets are financed through long term foreign currency loans (having a term of 12 months or more at the time of their origination) the exchange differences on such loans are added to or subtracted from the cost of such fixed assets. When an asset is scrapped or otherwise disposed off, the cost and related depreciation are removed from the books of account and resultant profit (including capital profit) or loss, if any, is reflected in the Profit and Loss Account. (ii) Land and Buildings had been revalued as at 31st October, 1984 at depreciated replacement values on the basis of a valuation made by a firm of Chartered Surveyors and Valuators. The indices, if any, used are not stated in the valuation. (b) (i) Leasehold land is amortized over the period of the lease. (ii) Depreciation on assets is calculated on Straight Line Method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956, except for : (1) certain items of Plant and Machinery individually costing more than Rs. 5,000 - over their useful lives (2 years, 3 years, 5 years or 7 years, as the case may be) as determined by the Company. (2) Cars and Vehicles - at 15% of cost. (iii) Depreciation charge for each year is after deducting the amount representing the depreciation on the increase due to revaluation of Land and Buildings, transferred from the Revaluation Reserve. (B) Intangible Assets : Intangible Assets are initially measured at cost and amortized so as to reflect the pattern in which the assets economic benefits are consumed. (a) Technical Knowhow : The expenditure incurred is amortized over the estimated period of benefit, not exceeding six years commencing with the year of purchase of the technology. (b) Development Expenditure : The expenditure incurred on technical services and other project/product related expenses are amortized over the estimated period of benefit, not exceeding five years.

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(c) Software Expenditure : The expenditure incurred is amortized over three financial years equally commencing from the year in which the expenditure is incurred. (C) Investments : Long term investments are valued at cost. However, provision for diminution in value is made to recognize a decline other than temporary in the value of investments. Current investments are valued at the lower of cost and fair value, determined by category of investment. (D) Inventories : Inventories comprise all costs of purchase, conversion and other costs incurred in bringing the inventories to their present location and condition. Raw materials and bought out components are valued at the lower of cost or net realizable value. Cost is determined on the basis of the weighted average method. Finished goods produced and purchased for sale, manufactured components and work in progress are carried at cost or net realizable value whichever is lower. Excise duty is included in the value of finished goods inventory. Stores spares and tools other than obsolete and slow moving items are carried at cost. Obsolete and slow moving items are valued at cost or estimated realizable value, whichever is lower. Long term contracts in progress are valued at cost. (E) Miscellaneous Expenditure (to the extent not written off or adjusted) : Expenditure carried forward under this head is being amortized as follows : (a) Finance Charges : The expenditure incurred in raising long term borrowings is amortized over the period of the borrowings. On early buyback, conversion or repayment of borrowings, any unamortized expenditure is fully written off in that year. (b) Separation and Other Costs : Special Payments/Pensions under Voluntary Retirement Schemes. The liability is amortized by the year ended March, 2010 from the month in which the liability is incurred. (F) Foreign Exchange Transactions : Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of transaction. Monetary items are translated at the year-end rates. The exchange difference between the rate prevailing on the date of transaction and on the date of settlement as also on translation of monetary items at the end of the year (other than those relating to long term foreign currency monetary items) is recognized as income or expense, as the case may be. Exchange differences relating to long term foreign currency monetary items, to the extent they are used for financing the acquisition of fixed assets are added to or subtracted from the cost of such

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fixed assets and the balance accumulated in `Foreign Currency Monetary Item Translation Difference Account and amortized over the balance term of the long term monetary item or 31st March, 2011 whichever is earlier. Any premium or discount arising at the inception of a forward exchange contract is recognized as income or expense over the life of the contract, except in the case where the contract is designated as a cash flow hedge. (G) Derivative Instruments and Hedge Accounting : The Company uses foreign currency forward contracts and currency options to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and highly probable forecast transactions. The Company does not hold derivative financial instruments for speculative purposes. The Company has applied to such contracts the hedge accounting principles set out in Accounting Standard (AS) 30 Financial Instruments: Recognition and Measurement by marking them to market. Changes in the fair value of the contracts that are designated and effective as hedges of future cash flows are recognized directly in Hedging Reserve Account and the ineffective portion is recognized immediately in the Profit and Loss Account. (H) Revenue Recognition : Sales of products and services are recognized when the products are shipped or services rendered. In respect of sale of property (concerning property development activity), the Company accounts for the income on the percentage of completion basis. [Refer paragraph (I) below]. Dividend from investments isrecognized in the Profit and Loss Account when the right to receive payment is established. (I) Property Development Activity : The Company accounts for income on the percentage of completion basis which necessarily involves technical estimates of the percentage of completion, and costs to completion of the activity, on the basis of which profits/losses are accounted. Such estimates, made by the Company and certified to the auditors, have been relied upon by them, as these are of a technical nature. (J) Government Grants : The Company is entitled to various incentives from a State Government, such as grants by way of refund of octroi duty paid by the Company for its manufacturing unit located in a developing region. In view of the uncertainty in respect of Organization.

O
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VARIATIONS IN SHARE VALUES IN NATIONAL STOCK EXCHANGE

(BY NSE DATA)

65

VARIATIONS IN SHARE VALUES IN BOMBAY STOCK EXCHANGE

(BY BSE DATA)

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CHAPTER VII
REPORTS BY ADMINISTRATION

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AUDITORS REPORT
Year End : 200903 1. We have audited the attached balance sheet of Mahindra & Mahindra Limited as at 31st March, 2009, the profit and loss account and also the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Companies (Auditors Report) Order, 2003 (hereinafter referred to as `the Order) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order. 4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that: i. we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit; ii. in our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books; iii. the balance sheet and the profit and loss account dealt with by this report are in agreement with the books of account; iv. in our opinion, the balance sheet and the profit and loss account dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; v. in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in the case of the balance sheet, of the state of affairs of the company as at 31st March, 2009; (b) in the case of the profit and loss account, of the profit for the year ended on that date; and (c) In the case of the cash flow statement, of the cash flows for the year ended on that date. 5. On the basis of the written representations received from the directors, as on 31st March, 2009, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2009 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956. Annexure to the Auditors Report

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(Referred to in paragraph (3) of the Auditors Report of even date to the members of Mahindra & Mahindra Limited.) (i) (a) The company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets. (b) The fixed assets have not been physically verified by the management during the year but the company has a system of verifying the fixed assets once in every three years. In our opinion the frequency of verification is at reasonable intervals. (c) During the year, in our opinion, a substantial part of fixed assets has not been disposed off by the company. (ii) (a) The inventory of the company has been physically verified by the management as at the year end. In respect of stocks lying with third parties, a substantial portion has been confirmed by third parties. In our opinion the frequency of verification is reasonable. (b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventory followed by the management were found reasonable and adequate in relation to the size of company and the nature of its business. (c) On the basis of our examination of records of inventory, in our opinion, the company has maintained proper records of inventory and the discrepancies noticed on physical verification between the physical stocks and the book records were not material in relation to the operations of the company. (iii) According to the information and explanations given to us, the company has neither granted nor taken any loans, secured or unsecured, to/from companies, firms, or other parties covered in the register maintained under section 301 of the Companies Act, 1956 and accordingly paragraphs 4(iii) (b), (c), (d), (f) and (g) of the Companies (Auditors Report) Order, 2003, are not applicable. (iv) In our opinion and according to the information and explanations given to us, having regard to the explanation that many of the items are of a special nature and their prices cannot be compared with alternative quotations, there are adequate internal control systems commensurate with the size of the company and the nature of its business for purchase of inventory, fixed assets and for the sale of goods and services. Further, on the basis of our examination and according to the information and explanations given to us we have neither come across nor have we been informed of any instance of major weakness in the aforesaid internal control system. (v) (a) In our opinion and according to the information and explanations given to us the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 have been entered in the register required to be maintained under that section. (b) In our opinion and according to the information and explanations given to us, having regard to comment in (iv) above, the transactions made in pursuance of such contracts or arrangements and exceeding the value of rupees five lakhs in respect of any party during the year have been made at prices, which are reasonable having regard to the prevailing market prices at the relevant time. (vi) In our opinion and according to the information and explanations given to us, the company has complied with the provisions of Section 58A, 58AA and any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975, as applicable, with regard to the deposits accepted from the public. According to the information and explanations given to us, no order under the aforesaid sections has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal, on the company. (vii) In our opinion, the company has an internal audit system commensurate with its size and nature of its business.

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(viii) We have broadly reviewed the books of account maintained by the company relating to the manufacture of motor vehicles and tractors pursuant to the rules made by the Central Government for the maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been maintained and are being made up. We have not, however, made a detailed examination of the records with a view to determining whether they are accurate or complete. To the best of our knowledge and according to the information given to us, the Central Government has not prescribed the maintenance of cost records under section 209 (1) (d) of the Companies Act, 1956, for any other products of the Company. (ix) (a) According to the information and explanations given to us and according to the books and records as produced and examined by us, in our opinion, the undisputed statutory dues including provident fund, investor education and protection fund, income-tax, sales-tax, service tax, value added tax, customs duty, excise duty, cess and other material statutory dues as applicable have been generally regularly deposited by the company during the year with the appropriate authorities. According to the information and explanations given to us, there are no arrears of outstanding statutory dues as mentioned above as at 31st March, 2009 for a period of more than six months from the date they became payable. (b) As at 31st March, 2009 according to the records of the company and the information and explanations given to us, the following are the particulars of dues on account of income-tax, sales-tax, wealth tax, service tax, customs duty, excise duty and cess matters that have not been deposited on account of any dispute:

Nature of the statute Income-Tax Laws Sales-Tax Laws

Nature of the dues Income-Tax Sales-Tax

Service Tax Laws Excise Duty Laws Custom Duty Laws

Service Tax Excise Duty Custom Duty

Amount Rs. in crores 0.81 46.81 15.57 184.65 1.56 0.17 377.88 110.51 4.55

Period to which Forum where pending the amount relates various years covering the period

1999

Appellate Authority - Tribunal Level

2004-2008 Appellate Authority - Commissioner (Appeals) 1988-2009 Appellate Authority - Commissioner (Appeals)

1987-2008 1986-2006 2002 1987-2009 1996-2001

High Court Appellate Authority - Tribunal Level Appellate Authority - Commissioner Appellate Authority - Tribunal Level Appellate Authority - Tribunal Level

2007-2009 Appellate Authority - Commissioner (x) The company does not have accumulated losses as at 31st March, 2009 and has not incurred cash losses during the financial year ended on that date and in the immediately preceding financial year. (xi) In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to a financial institution, bank or to debenture holders during the year. (xii) In our opinion and according to the information and explanations given to us, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures

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and other securities. (xiii) The provisions of any special statute as specified under paragraph 4(xiii) of the said Order are not applicable to the company. (xiv) In our opinion the company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of paragraph 4(xiv) of the Order are not applicable to the company. (xv) According to the information and explanations given to us, the company has not given any guarantees for loans taken by others from banks or financial institutions, the terms and conditions, whereof, in our opinion, are prejudicial to the interest of the company. (xvi) In our opinion and according to the information and explanations given to us, the term loans were applied for the purpose for which the loans were obtained. (xvii) Based on the information and explanations given to us and on an overall examination of the balance sheet of the company, in our opinion, funds raised on short term basis have not been used for long term investments. (xviii) The company has not made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956, during the year. (xix) According to the information and explanations given to us, the company has created security in respect of debentures issued during the year. (xx) The company has not raised any money by public issue during the year. (xxi) During the course of our examination of the books and records of the company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of significant fraud on or by the company, noticed or reported during the year nor have we been informed of such case by the management.

For DELOITTE HASKINS & SELLS Chartered Accountants B.P. Shroff (Partner) Membership Number: 34382
Mumbai, 28th May, 2009

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DIRECTORS REPORT

Year End : 200903 The Directors present their Report together with the audited accounts of your Company for the year ended 31st March, 2009. Financial Highlights (Rs. in crores)

Gross Income Less: Excise Duty on Sales (Net) Net Income Profit before Depreciation, Interest, Exceptional items and Taxation Less: Depreciation/Amortization Profit before Interest, Exceptional items and Taxation Less: Interest (Net) Profit before Exceptional items and Taxation Add: Exceptional items Profit before Taxation Less: Provision for Tax - Current Tax (including Fringe Benefit Tax) Less: Provision for Tax - Deferred Tax (Net) Profit for the year Add: Profit of Mahindra Holdings

2009 14983 1619 13364 1363 292 1071 45 1026 10 1036 58 141 837

2008 13238 1566 11672 1497 239 1258 24 1234 173 1407 279 25 1103

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& Finance Limited for the period 1st February, 2008 to 31st March, 2008 Balance of profit for the year Balance of profit for earlier years Add: Amount transferred on Amalgamation of Mahindra Holdings & Finance Limited Less: Transfer from Debenture Redemption Reserve Profits available for appropriation Less: Transfer to General Reserve Credit of Income-tax on Proposed Dividend of Previous Year Proposed Dividend Income-tax on Proposed Dividend Balance carried forward

31 868 2775

1103 2125

160 30 3773 100 (4) 279 33 3365

17 3211 115 283 38 2775

The year under review was an extremely trying one. The market place witnessed unprecedented turbulence in the wake of the Global Financial meltdown. A runaway inflation touching a high point of 12% early in the year, the tight monetary policies followed by the authorities for most of the year to control inflation with the consequent high interest rates, the precipitous fall in the value of the Rupee by 26% during the year and weak consumer demand all led to an extremely challenging environment in which the Company had to operate. Despite these daunting conditions, the net income of the Company grew by 14.5% to 13,364 crores in the year under review from Rs.11, 672 crores in the financial year 2008. However, the difficult global economic climate of the year exerted considerable pressure on the Company and the profit after tax for the current year was Rs.837 crores against Rs.1, 103 crores for the previous year. Dividend Your Directors are pleased to recommend a dividend of Rs.10 per Equity Share, payable to those Shareholders whose names appear in the Register of Members as on the Book Closure Date. In recognition of the difficult economic climate in which the Company operated during the year, a small reduction is being made in the proposed dividend as compared to the dividend of Rs. 11.50 per Equity Share paid in the previous year. Also the proposed dividend will be paid on a slightly enlarged capital base of Rs.278.82 crores (as against Rs. 245.74 crores in the previous year). The equity dividend outgo for the financial year 2008-09, inclusive of tax on distributed profits (after reducing the tax on distributed profits of Rs.14.15 crores payable by the subsidiaries on the dividends receivable from them during the current financial year) would absorb a sum of Rs.312.06 crores (as against Rs.321.09 crores comprising the dividend of Rs.11.50 per Equity Share paid for the previous year). Automotive Sector: The global economic downturn and softening of growth in the Indian economy had an adverse impact on the Indian automotive industry due to strong linkages of the industry with the economy and the Company took corrective steps to align the Companys production to reduced demand accordingly. A total of 1, 81,842 vehicles and 43,278 three-wheelers were produced as against 2, 00,132 vehicles and 34,556 three-wheelers in the last year. These include 8,723 light commercial vehicles (LCVs) and 14,404 cars (previous year 11,079 LCVs and 26,653 cars) manufactured and supplied to two of the Companys subsidiaries viz. Mahindra Navistar Automotive Limited (MNAL) and Mahindra Renault Private Limited (MRPL). Your Company recorded total sales of 1, 61,882 vehicles and 44,806 three-wheelers as compared to 1, 61,001 vehicles and 34,076 three-wheelers in the previous year registering a growth of 0.5%

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and 31% in vehicle sales and three-wheeler sales respectively. The domestic sales volume of 1,53,654 vehicles [includes 1,53,653 Multi Utility Vehicles (MUVs) and 1 LCV] was higher by 3.3% than the previous years volume of 1,48,791 vehicles (includes 1,48,761 MUVs and 30 LCVs) and the domestic sales volume of 44,533 three-wheelers was higher by 31.3% than the previous years volume of 33,927 three- wheelers. The Companys domestic MUV sales volume grew by 3.3% as against the industry MUV sales de-growth of 7.4%. In the process, your Company strengthened its dominant position in the domestic MUV segment by increasing its market share to 57.2% over the previous years market share of 51.3% - the highest since fiscal 2000. The Bolero Brand once again demonstrated its popularity by registering a significant growth over the previous year. It remains Indias largest selling MUV brand for the fourth consecutive year. The Companys exports were severely impacted by the global downturn. During the year under review, your Company exported 8,501 vehicles [including 693 LCVs sourced from MNAL and 273 three-wheelers] as compared to the exports of 12,359 vehicles [including 363 LCVs sourced from MNAL and 149 three-wheelers] in the financial year 2008 registering a de-growth of 31%. Spare parts sales for the year stood at Rs.362.7 crores (Exports Rs.27 crores) as compared to Rs.388.3 crores (Exports Rs.39.9 crores) in the previous year. Farm Equipment Sector: The financial year ending March, 2009 saw the merger of erstwhile Punjab Tractors Limited (PTL) with your Company, with effect from 1st August, 2008, the Appointed Date of the merger. The merger became effective from 16th February, 2009 and from the said date it operates as a part of the Farm Equipment Sector of your Company, as its Swaraj Division. Therefore, the current year business figures of your Company include PTLs financials for the period from 1st August, 2008 to 15th February, 2009. During the year under review, your Company achieved a production of 1,19,098 tractors compared to 98,917 tractors in the previous year. In addition, 52,131 engines were produced for Mahindra Powerol Brand compared to 32,072 engines last year. Following the merger, the two tractor manufacturing plants of the erstwhile PTL at Mohali and Chappercheri along with its foundry facility at Sialba Majri, near Mohali, stands added to the existing tractor manufacturing plants of your Company at Rudrapur, Nagpur, Kandivali and Jaipur. For the financial year ending on March, 2009, your Company recorded sales of 1,20,202 tractors as against 99,042 tractors sold in the previous year. This included domestic tractor sales of 1,13,269 tractors as compared to domestic sales of 90,509 tractors in the previous year, recording a growth of 25.1%. This performance should be considered against the backdrop of an almost flat industry (+0.6%), faced with the impact of: a) liquidity crunch following the global economic crisis b) stringent lending norms for farm loans due to higher NPAs and c) high interest rates prevalent throughout the year. The sharp rise in raw material prices in the first half of the year and the consequent price increases by all tractor manufacturers also impacted demand. As a result of the merger of the erstwhile PTL, your Company has firmly established its dominance in the Indian tractor industry, ending the financial year 2009 with a market share of 40.8%, compared to a market share of 29.8% in the previous financial year. This is the 26th consecutive year of leadership in the Indian tractor industry. The global economic crisis and the subsequent impact on economies across the globe, including adverse changes in some international currencies had a negative impact on exports from India, including tractors. As a result, this year your Company exported 6,933 tractors, registering a degrowth of 19%, as compared to 8,533 tractors exported last year. In the farm mechanization space beyond tractors, your Company sells farm implements and other equipments. The Swaraj Division Plant at Chappercheri is an established manufacturer of harvester

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combines in the organized Sector in India. Beyond the Agri space, under the Mahindra Powerol Brand, your Company sold 52,350 engines and gensets in this financial year, as against 31,922 engines and gensets last year - a growth of 64%. With this performance, your Company retained its leadership position in the genset market catering to the telecom space, while strengthening its presence in the retail segment. Mahindra Defense Systems Division (MDS): With the opening up of the Defense Sector for Private Sector participation in February, 2001, your Company constituted a separate Division viz. MDS to pursue a wide range of Defense Sector activities. Your Company provides world class armoring solutions for light combat vehicles and Sports Utility Vehicles (SUVs) as well as high mobility vehicles for defense, police and paramilitary use. During the financial year 2009, your Company has commenced operations at the newly commissioned Mahindra Special Military Vehicles ("MSMV") facility at Prattle, near Faridabad in Haryana. This is the first such dedicated defense vehicle facility in the private sector in India and is designed to provide up-armored and high mobility vehicles to the armed forces, police and Paramilitary forces. Currently, the Plant has an annual capacity of 500 such vehicles and during the financial year 2010 this capability is likely to be expanded further. In its endeavor to continuously offer technologically better and a wider range of products to the defense forces, your Company has established a Product Development Centre at MSMV. Based on work carried out in the Product Development Centre, product improvements have been effected in the Bullet Proof Scorpio and Rakshak. The Product Development Centre has carried out development of the AXE high mobility vehicle, Marksman and Light Bullet Proof Vehicle based on the specifications of various Government customers. These products have been procured by all the State Governments who are facing problems of insurgency and militancy. Currently, MDS is engaged in two lines of Defense Businesses (a) Land Systems and (b) Naval Systems. Your Company through MDS has obtained licenses from the Government of India to manufacture a wide range of products which include light armored vehicles, weapon effect simulators, platforms for surveillance sensors and sea mines for the Navy. Through these initiatives, your Company has positioned itself to play a major role in the Indian Defense Sector for the manufacture and integration of weapon systems and platforms. Your Company has been exploring opportunities for partnerships with companies equipped with globally proven high end defense technologies and willing to invest in India on a long term basis. With this objective, your Company is evaluating various options and identifying possibilities for forming separate joint ventures/alliances with strategic partners for carrying on both the Land Systems and Naval Systems Businesses respectively. Accordingly, your Company had proposed to transfer Land Systems and Naval Systems Businesses of MDS together with congeries of rights of the Company in such businesses, to two separate subsidiaries of the Company. In terms of section 293(1)(a) of the Companies Act, 1956 ("the Act") and in terms of section 192A of the Act read with Clause 4(f) of the Companies (Passing of the Resolution by Postal Ballot) Rules, 2001, approval of the Shareholders was obtained by means of a Postal Ballot. Currently, the Company is in the process of transferring these Businesses into two separate subsidiaries. Profits: The Profit for the year before Depreciation, Interest, Exceptional items and Taxation was Rs.1,362.97 crores as against Rs.1,496.94 crores in the previous year, a decline of 8.95%. Profit after tax after considering the profits earned by the erstwhile Mahindra Holdings & Finance Limited for the period 1st February, 2008 to 31st March, 2008 was Rs.867.51 crores as against

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Rs.1,103.37 crores in the previous year, a decline of 21.38%. Your Company continues with its rigorous cost restructuring exercises and efficiency improvements which have resulted in significant savings through continuous focus on cost controls, process efficiencies and product innovations that exceed customer expectations in almost all areas thereby enabling the Company to take full advantage of the recovery in the economy, as and when it happens. Management Discussion and Analysis Report A detailed analysis of the Companys performance is discussed in the Management Discussion and Analysis Report, which forms part of this Annual Report. Corporate Governance Your Company is committed to transparency in all its dealings and places high emphasis on business ethics. During the year, your Company received the National Award for Excellence in Corporate Governance from The Institute of Company Secretaries of India, highlighting the good Corporate Governance systems and practices adhered to by the Company. During the year, CRISIL has re-affirmed the highest level rating, (Level 1) for Governance and Value Creation for the third year in a row. This rating indicates that the capability of the Company with respect to wealth creation for all its stakeholders while adopting strong Corporate Governance practices is the highest. A Report on Corporate Governance along with a Certificate from the Statutory Auditors of the Company regarding the compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report. Issue of Shares upon Amalgamations During the year, two subsidiaries of the Company viz. erstwhile Mahindra Holdings & Finance Limited (MHFL) and erstwhile Punjab Tractors Limited (PTL) got amalgamated with the Company; the details whereof are given elsewhere in this Report. Pursuant to the Scheme of Amalgamation of MHFL with Mahindra and Mahindra Limited and their respective Shareholders (MHFL - M&M Scheme), 5,13,10,208 equity shares held by the Company in MHFL stood vested in the Trustees of the M&M Benefit Trust. Upon the MHFL - M&M Scheme becoming effective, 1,28,27,552 Ordinary (Equity) Shares of Rs.10 each of the Company were allotted to the Trustees of M&M Benefit Trust in the Share Exchange Ratio of 1 Ordinary (Equity) Share of Rs.10 each fully paid- up in the capital of the Company in respect of every 4 equity shares of Rs.10 each fully paid-up in the equity share capital of the erstwhile MHFL on the Effective Date. Pursuant to the Scheme of Amalgamation of PTL with Mahindra and Mahindra Limited and their respective Shareholders (PTL - M&M Scheme), all the equity shares held by the Company in PTL vested in the Trustees of the M&M Benefit Trust. Subsequently, upon the PTL - M&M Scheme becoming effective: a) 2,02,45,395 Ordinary (Equity) Shares of Rs.10 each of the Company were allotted to the Shareholders of the erstwhile PTL whose names appeared in the Register of Members as on 4th March, 2009, being the Record Date fixed for this purpose, in the Share Exchange Ratio of 1 Ordinary (Equity) Share of Rs.10 each fully paid-up in the capital of the Company in respect of every 3 equity shares of Rs.10 each fully paid-up in the equity share capital of the erstwhile PTL, and b) 6,505 Ordinary (Equity) Shares of Rs.10 each of the Company were allotted to the Trustees of M&M Fractional Entitlements Trust set up pursuant to the Scheme, against 19,515 equity shares of Rs.10 each fully paid-up in the equity share capital of the erstwhile PTL being the aggregate of all the fractional entitlements of various Shareholders of the erstwhile PTL. Upon both the MHFL - M&M Scheme and the PTL - M&M Scheme becoming effective, the issued,

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subscribed and paid-up Share Capital of the Company post allotment of Shares as aforesaid stands at Rs.278.82 crores comprising of 27,88,21,265 Ordinary (Equity) Shares of Rs.10 each fully paid-up and the Authorized Share Capital of the Company stands at Rs.625 crores comprising of 60,00,00,000 Ordinary (Equity) Shares of Rs.10 each and 25,00,000 Unclassified Shares of Rs.100 each. Finance The financial year 2009 has been a very challenging year for corporates in the wake of the unprecedented global financial crisis. The financial markets worldwide faced massive falls in equity values, collapse of fixed income markets, liquidity crunch and huge foreign exchange fluctuations. All Banks resorted to credit freeze which was a major action that posed a major challenge to operations of companies. Inspite of it being a very tough year for all the companies across the globe and in India, your Company has successfully managed its cash flows efficiently and preserved its credit lines to maintain a comfortable liquidity position. The Bankers continue to rate your Company as a prime customer and extend facilities/services at prime rates. During the year, your Company has successfully accessed both domestic and overseas capital markets with diverse instruments, maturities and interest rates to part finance its requirements. In the domestic market, your Company raised Rs.400 crores by way of private placement of Secured, Non-Convertible Redeemable Debentures ("NCDs") with an average maturity of 6 years. Your Company managed to raise the NCDs at highly competitive rates inspite of there being a severe credit freeze and liquidity crunch in the market. ICRA Limited has assigned a "LAA+" rating to these NCDs indicating high credit quality. In the last years Directors Report, details were mentioned about the Companys successful offering of Rs.700 crores comprising of 93,95,974 Unsecured Fully and Compulsorily Convertible Debentures ("FCD"), each FCD having a face value of Rs. 745 and convertible into one Equity Share of Rs. 10 each in the Company at a price of Rs. 745 per Share at any time within 18 months from the date of allotment of the FCD at the option of the Investor and mandatorily convertible into Equity Shares on the date falling 18 months from the date of allotment. These FCD were issued in July, 2008 after the funds were received. During the year, Reserve Bank of India ("RBI") announced a Scheme granting general permission to issuers of Foreign Currency Convertible Bonds ("FCCBs") to buyback the FCCBs, subject to certain parameters. Your Company was amongst the first few to avail of this opportunity. To date, the Company has bought back 105 FCCBs of face value of USD 1,00,000 aggregating USD 10.50 million. The FCCBs bought back were part of the USD 200 million outstanding FCCBs issued in the financial year 2006. Your Company also raised Unsecured External Commercial Borrowings (ECB), at competitive cost to re-finance the buyback. Your Company follows a prudent financial policy and aims to maintain optimum financial gearing at all times. The Companys total Debt to Equity Ratio was 0.56 as at 31st March, 2009. Your Company has been rated by CRISIL, ICRA Limited (ICRA) and Credit Analysis & Research Limited (CARE) for its banking facilities under Basel II norms. During the year, CRISIL has assigned a rating of "AA/ Negative Outlook" for Long Term banking facilities. This has been revised from the earlier rating of "AA+/Negative Outlook". CRISIL rating indicates high safety on timely payment of financial obligations. The revision is a reflection of the significant impact of the weakening business environment on the revenues and profitability of your Companys Automotive and Tractor businesses as also CRISILs estimate of your Companys financial risk profile in view of the ongoing capital expenditure plans.

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ICRA and CARE have maintained a Long Term Rating of `LAA+ and `CARE AA+ respectively. CRISIL, ICRA and CARE have all assigned the highest rating for your Companys Short Term facilities. Stock Options On the recommendation of the Remuneration/ Compensation Committee of your Company, the Trustees of the Mahindra & Mahindra Employees Stock Option Trust have granted 26,34,363 Stock Options to Eligible Employees during the year under review. Details required to be provided under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are set out in Annexure I to this Report. Industrial Relations Industrial Relations remained cordial and harmonious throughout the year. The Management Discussion and Analysis Report gives an overview of the developments in Human Resources/Industrial Relations during the year. Subsequent to the year end, the workmen at the Nasik Plant of the Automotive Sector of the Company resorted to an illegal tool down strike in response to a disciplinary action initiated against an office bearer of the Employees Union for alleged acts of indiscipline. The aforesaid illegal strike temporarily affected the production at the Nasik Plant. The Nasik Industrial Court, by its Order dated 13th May, 2009, has declared the tool down strike by workmen at the Nasik Plant as illegal and unjustified. The Employees Union has withdrawn its strike with effect from 18th May, 2009 and production has resumed in the Nasik Plant of the Company and normalcy restored. Safety, Health and Environmental Performance Your Company has always demonstrated its strong commitment and responsibility towards Safety, Occupational Health and Environment which stems from its Vision and enjoins upon the Company to sustain business growth with deep commitment towards Safety, Occupational Health and Environment. Health and Safety Your Company has a well established Safety, Occupational Health & Environmental Policy (SH&E) which is revised under EMS & OHSMS Standard for all the locations of the Automotive Sector. The SH&E Policy inter alia ensures safety of public, employees, plant, equipment and business associates, ensuring compliance with all statutory rules and regulations on a monthly basis, imparting training to its employees and business associates as per the Training Calendar, carrying out Statutory safety audits of its facilities as per legal requirements, conducting regular medical check-ups of its employees and promoting eco-friendly activities. Various initiatives on Safety including Safety Promotions, Safety Patrol Rounds, Safety and Surveillance Audits, Safety Training with focus on behaviour based safety, Safety Kaizens, reporting of near-miss incidents are encouraged to resolve safety issues. Special initiatives such as emergency mock drills and upgradation of Fire Protection Systems have been carried out thereby improving Safety Performance. Your Companys Plants continue to strive to achieve "Accident Reduction" in all its units ensuring a safety culture throughout all levels of the organization. Certifications ISO 14001:2004 provides a framework for the Companys Automotive Sectors environmental initiatives, objectives and targets that helps in continually improving its environmental performance. All Plants of the Automotive Sector have been certified with the amended standard

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for Environmental Management System ISO 14001: 2004. Further, implementation of OHSMS Standard has reinforced the Companys commitment of Safety and Occupational Health to highest levels. OHSAS 18001:2007 are the existing best safety practices and are implemented through the amended management system and all Plants of the Automotive Sector have been certified during the year 2008-09. Likewise, Surveillance Audits of OHSAS 18001 and ISO 14001 at select plants of the Tractor Division have also been completed. Ensuring compliance The focus on statutory compliance in your Company is based on robust internal and external auditing systems through Integrated Management Systems which dwell upon legal and other requirements. The evaluation of compliance is reviewed periodically through monitoring and measurement schedules. Your Company continued its commitment to improve the wellbeing of its employees by conducting curative, preventive and specialized medical check-ups. Employees have also been educated with advisories on industrial and personal hygiene and safety performance at the work place. Safety Performance Keeping Safety as a key factor, the Central Safety Committee of the Mahindra Group was formed by the Mahindra Group Management Board. With a view to enhance the performance of each Sector from within the Group, the overall safety performance is reviewed periodically under the guidance of a Chairman nominated from the Senior Management. With the help of Behavioral Based Safety (BBS) implementation, the Companys Plants continue to strive to eliminate accidents in its units. External Safety Audits Mahindra Manufacturing Excellence Award for Safety, Health & Environmental activities for the year 2008-09 has been assessed by an external agency to confirm the rating of each Plant and the Companys best safety practices and systems are shared and implemented for horizontal deployment. Environmental Initiatives Air Pollution Management: With a clear focus on the need for a clean environment, the Company is now in the process of calculating carbon foot print and taking adequate measures to mitigate the causes. The Company has taken steps to reduce greenhouse emissions through workplace air monitoring, effluent treatment, waste monitoring and volatile organic carbon monitoring. All Plants of the Tractor Division have successfully undergone first Sustainability Audit conducted by Ernst & Young. Your Company is constantly imbibing the major environment sensitization drives amongst its employees through various events and training programs such as celebration of World Environment Day, Energy Conservation Month and increased green zones. Water and Waste Water Management: The Company has taken various initiatives to achieve waste reduction and is committed towards resource conservation through various water management methods, recycling and re-use of treated waste water in process, revised water portability monitoring, rainwater harvesting and

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recharging within plant premises. Solid Waste Management: Your Company is committed towards responsible disposal of hazardous and non-hazardous waste. While generation of waste to a great extent has been reduced at source, the same if adaptable is recycled and reused. The Company is aggressively working towards minimizing the waste disposal cost and is executing various management programmes at all its locations i.e. vermiculture, biogas Plant to convert food waste to manure/cooking gas, etc. The Company also ensures environment friendly disposal of hazardous e-waste. Greenbelt Development: Your Company partners with Non-Government organizations and academic institutions at various Plant locations for green belt development and Mahindra Hariyali is one such initiative. Corporate Social Responsibility The Indian economy today is undoubtedly feeling the effects of global recessionary trends. The resultant downturn in economic activity is often likely to hit hardest, those people and communities that are already vulnerable. The need of the hour is to therefore continue to give high priority to these disadvantaged communities. Keeping with the Companys core value of Good Corporate Citizenship, the Mahindra Group continues to display its social responsibility by directing 1% of its profit after tax ("PAT") to Corporate Social Responsibility ("CSR") initiatives which would benefit the socially and economically disadvantaged sections of society. Some of the major initiatives in which the Company has invested in are described below: Mahindra Pride School: The Mahindra Pride School at Chinchwad near Pune, provides livelihood and skills training to youth from socially disadvantaged communities (comprising mainly of Scheduled Caste/Scheduled Tribe youth). Since its establishment on 23rd March, 2007, 1,202 students have been imparted with "employable" skills through a training course of 3 months duration. The School provides training in four faculties i.e. Hospitality Craft, Customer Relationship Management, Hardware and Networking and Call Centre Training. All students also undergo mandatory courses in English, Life skills and Computer Applications. There has been 100% placement of the students participating in the placement process with starting monthly salaries ranging from Rs.4,500 to Rs.15,000. The Mahindra Group has also entered into a Memorandum of Understanding with the Government of Rajasthan in April, 2008, to construct the second Mahindra Pride School in Jaipur, Rajasthan. It is now awaiting the handover of 2,500 sq. mtrs. of land offered by the Government of Rajasthan, to proceed with construction of the School building. Mid-Day Meal Kitchen: Honorable Ex-Chief Minister of Rajasthan Smt. Vasundhara Raje, inaugurated the centralizedMidDay Meal Kitchen set up by the Company on 20th September, 2008. The Mid Day Meal Kitchen at Govindgarh Block, Jaipur District, Rajasthan, is a result of a unique tripartite agreement between the Company, Government of Rajasthan and Naandi Foundation with the prime objective being "to fight hunger in Schools". This centralizedMid-Day Meal Kitchen ensures that high quality, hygienically prepared Mid-Day Meals containing a minimum of 450 calories are served to the children. The Company has spent Rs.1 crore, for setting up of this central kitchen, which today feeds over 25,000 school children from Class 1 to 5, covering 314 schools in two blocks of Chomu and Govindgarh, thereby making schooling and learning a complete experience.

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Supporting Nanhi Kali: Project Nanhi Kali, which supports the education of the disadvantaged girl child, has been the flagship programme of the K. C. Mahindra Education Trust. The Mahindra Group has committed to independently support 6,000 girls in urban, rural and tribal parts of India by providing academic support as well as material support in the form of uniforms, clothes, school bags, shoes, etc. In addition, the Mahindra Group, through K. C. Mahindra Education Trust, has entered into a partnership with the Government of Rajasthan to jointly support the education of 10,000 disadvantaged girls in the tribal area of Udaipur District through Project Nanhi Kali, with the Government of Rajasthan supporting 5,000 Nanhi Kalis and the Company supporting the education of 5,000 girls. In total, the Mahindra Group continues to support the education of 11,000 underprivileged girls through Project Nanhi Kali. With support from individuals and other corporate donors like the Mahindra Group, Project Nanhi Kali now supports the education of over 49,454 underprivileged girls, in poor urban, rural and tribal communities across 8 States of India. Gifting Cochlear Implants: By gifting the power of sound through the donation of Cochlear Implants, the Mahindra Group has changed the life and future of 49 profoundly hearing-impaired, underprivileged children till date. Operations are performed by Dr. Milind Kirtane, Indias leading ENT surgeon. All recipients are selected in consultation with Dr. Kirtane and his team of doctors, audiologists, teachers of the hearing impaired and social counselors. All beneficiaries are hearing impaired children below the age of 5, belonging to the lower socio economic strata of society. Mahindra All India Talent Scholarships (MAITS): During the year, 510 students from 11 centres all over India were awarded the MAITS which enabled them to pursue job oriented diplomas at a recognized Government Polytechnic in India. The Scholarship is awarded for a 3 year period. A majority of the scholarship awardees are girls, as the Trust is keen to empower girls through vocational education. Till date, 4,260 students have been awarded the MAITS with majority of them belonging to very poor families where average income of the family ranges from Rs.1,500 to Rs.2,000 per month. Employee Social Options: Employee Social Options ("Esops") is a unique programme at the Mahindra Group where each employee can do social work by volunteering in various CSR initiatives. This year, 10,341 employees volunteered for various social activities in their local communities. Esops was formally launched in 8 new locations of Mahindra Group. Some of the Notable Esops initiatives this year were: The Lifeline Express in Assam: This was jointly sponsored and organized by Automotive Sector and Mahindra & Mahindra Financial Services Limited in Guwahati. The project was held in the remote area of Rangia in Assam and 594 surgeries were performed free of cost (Cleft Lip, Polio, Cataract and Deafness). Esops Volunteers spent 9,376 man hours in this activity whereas 19,392 man hours were spent by community volunteers - thus making it an ideal public-private partnership initiative. Target Surpassed "Mahindra Hariyali": In October, 2008, the Managements vision of planting one million trees was surpassed with 12, 21,118 trees being planted by enthusiastic employee volunteers and community partners (NGOs, villagers, local schools, local colleges, etc.). All Sectors of the Mahindra Group and the Mahindra United World College of India participated in the Groups green endeavor. Bihar Flood Relief: The devastating Bihar floods saw immediate help from Esops Volunteers of Mahindra along with local Dealers at Purnea. Immediately after the floods, the Mahindra relief team systematically distributed food, clothes and other crucial items worth Rs.15 lakhs to over 10,000 affected people through 15 relief camps mainly at Purnea, Madhepura and Araria. In the

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second phase, 10,000 blankets were distributed in Murliganj and Madhepura. Employees of the entire Mahindra Group gave one days salary towards the relief of the Bihar flood victims and this amount was matched by the Mahindra Group. A complete rehabilitation project worth Rs.3.57 crores is in the pipeline and will begin in the next few months. Other Esops activities also included initiatives in Education, Health and Environment having long lasting impact. 60 initiatives were conducted in Education (such as distributing educational material, IT/vocational training, infrastructure development) by 745 Esops volunteers impacting 17,656 lives. 94 health initiatives such as medical camps, mobile dispensaries, etc. reached out to over 71,913 people. Over 33 Blood donation Camps were held across various plants and offices of the Mahindra Group. 340 HIV/AIDS awareness campaigns reached out to over 1 lakh people in Nasik. Sustainability Initiative The threats of Global Warming and Climate Change have become the defining issues of our era for all humanity. The scientific facts before us are overwhelming and cannot be ignored. How and what we do to address these threats, directly affects the entire spectrum of our life and only collaborative efforts by Governments, Corporate Bodies and Society will lead to a solution to this draconian challenge before us. Your Company has always been sensitive to the fact that, since Corporations are vital organs of Society, Corporate interests must serve societal concerns and play an active role in fulfilling its social responsibilities. Hence, in its 60th year, the Company committed to pledge 1% of its Profit after Tax (PAT) to benefit the socially and economically disadvantaged sections of the Society. The Company now needs to take this responsibility to encompass a wider spectrum, and extend it to the conservation of the ecological integrity of our planet by way of responsible business practices and greater accountability and transparency. Hence in October, 2008, the first Mahindra Group `Sustainability Report, was released, setting out its `triple bottom line performance i.e. performance towards the environmental, societal as well as economic aspects, towards creating sustainable value for all its stakeholders. This was in accordance with the latest Guidelines of the internationally accepted, Global Reporting Initiative (GRI). This Report was affirmed by Ernst & Young and conforms to the highest level for reporting `Sustainability performance, which is A+. The report and the performance rating of A+ was checked and confirmed by GRI. (GRI is a Netherland based multi-stakeholder network of thousands of experts worldwide, which has pioneered the development of the worlds most widely used sustainability reporting framework. This reporting framework sets out the principles and indicators that organizations can use to measure and report their economic, environmental and social performance). In order to generate and enhance awareness about "Sustainability" among Shareholders, the synopsis of the above mentioned Sustainability Report and the reason why there is a need to change the way business was done so far, has been elaborated on Pages 68 and 69 of this Annual Report. The detailed Mahindra Group Sustainability Report is available on the Companys website http://www.mahindra.com. This Report is essentially the first step which will take your Company on a `Sustainability journey and enabling it to make conscious plans, to reduce GHG emissions and waste as well as conserve water, bio- diversity and natural resources, as a part of its growth strategy. It is a matter of pride that this first Report bearing the theme `Alternative Thinking was ranked 5th under the category of `Creativity in Communications by the Corporate Register Reporting Awards. These are the 1st global, independent and online awards for `triple bottom line or `Sustainability reporting, designed to acknowledge the best in Corporate non-financial reporting in which majority of the FT 500 companies have participated. Directors

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Life Insurance Corporation of India ("LIC") withdrew the nomination of Mr. Thomas Mathew T., as a Nominee Director with effect from 30th July, 2008. Consequently, Mr. Mathew ceased to be a Director of the Company. Mr. Arun Kanti Dasgupta was appointed as a Director in the vacancy caused by the withdrawal of nomination of Mr. Mathew by LIC at the Meeting of the Board of Directors held on 30th July, 2008. Mr. Dasgupta holds office up to the date of the forthcoming Annual General Meeting as Mr. Mathew, in whose place he has been appointed, would have retired by rotation at the forthcoming Annual General Meeting. The Company has received a Notice from a Member under section 257 of the Companies Act, 1956, signifying his intention to propose Mr. Dasgupta for the office of Director. The Board has placed on record its sincere appreciation of the valuable services rendered by Mr. Mathew during his tenure as a Director of the Company. Mr. Deepak S. Parekh, Mr. Bharat Doshi and Mr. Narayanan Vaghul retire by rotation and, being eligible, offer themselves for re-appointment. Directors Responsibility Statement Pursuant to section 217(2AA) of the Companies Act, 1956, your Directors, based on the representations received from the Operating Management, and after due enquiry, confirm that: (i) in the preparation of the annual accounts, the applicable accounting standards have been followed; (ii) they have, in the selection of the accounting policies, consulted the Statutory Auditors and these have been applied consistently and reasonable and prudent judgments and estimates have been made so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2009 and of the profit of the Company for the year ended on that date; (iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) The annual accounts have been prepared on a going concern basis. Subsidiary Companies The subsidiary companies of your Company continue to contribute to the overall growth of the Company. Major subsidiaries such as the Tech Mahindra Group with a 208% growth in profits, Mahindra & Mahindra Financial Services Limited with a 21% growth in profits and Mahindra Holidays and Resorts India Limited with a 3.59% growth in profits deserve special mention. The consolidated Group Profit for the year after exceptional items, prior period adjustments and tax and after deducting minority interests is Rs.1, 405.41 crores as against Rs. 1,571.12 crores earned last year. During the year under review, Mahindra Gears International Limited, Mahindra Gears Global Limited, Mahindra Gears Cyprus Limited, Mahindra Metalcastello S.r.l., Mahindra Bebanco Developers Limited, Mahindra Industrial Township Limited, Metalcastello S.p.A, Crest Geartech Private Limited, Engines Engineering S.r.l., Eff Engineering S.r.l., ID-EE S.r.l., Mahindra IT Consulting Private Limited, Mahindra Two Wheelers Limited, Mahindra Automotive Australia Pty. Limited, Mahindra United Football Club Private Limited, Mahindra Defense Land Systems Private Limited, Venturbay Consultants Private Limited and Mahindra Yueda (Yancheng) Tractor Company Limited became subsidiaries of your Company.

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During the year under review, iPolicy Networks Limited, Tech Mahindra (R&D Services) Limited, Tech Mahindra (R&D Services) Inc., Mahindra Holdings & Finance Limited, Mahindra Retail Private Limited and Punjab Tractors Limited ceased to be subsidiaries of the Company. Subsequent to the year-end, Mahindra Industrial Township Limited has changed its name to Industrial Township (Maharashtra) Limited, Mahindra Knowledge City Limited has changed its name to Knowledge Township Limited, Plexion Technologies GmbH has changed its name to Mahindra Engineering GmbH and Mahindra SAR Transmission Private Limited has changed its name to Mahindra Gears & Transmissions Private Limited. The Statement pursuant to section 212 of the Companies Act, 1956 containing details of the Companys subsidiaries is attached. The Consolidated Financial Statements of the Company and its subsidiaries, prepared in accordance with Accounting Standard AS21 form part of the Annual Report. In terms of the approval granted by the Central Government under section 212(8) of the Companies Act, 1956, copy of the Balance Sheet, Profit and Loss Account, Reports of the Board of Directors and Auditors of the subsidiaries have not been attached to the Balance Sheet of the Company. The Company Secretary will make these documents available upon receipt of request from any Member of the Company interested in obtaining the same. However, as directed by the Central Government, the financial data of the subsidiaries have been separately furnished forming part of the Annual Report. These documents will also be available for inspection at the Head Office of the Company and at the office of the respective subsidiary companies, during working hours upto the date of the Annual General Meeting. Auditors Messrs. Deloitte Haskins & Sells, Chartered Accountants, retire as Auditors of the Company and have given their consent for re-appointment. The Shareholders will be required to elect Auditors for the current year and fix their remuneration. As required under the provisions of section 224(1B) of the Companies Act, 1956, the Company has obtained a written certificate from the above Auditors proposed to be re- appointed to the effect that their re-appointment, if made, would be in conformity with the limits specified in the said section. Public Deposits and Loans/Advances Out of the total 7,522 deposits of Rs.3,093.79 lakhs (including 23 unclaimed deposits of Rs.8.99 lakhs of the erstwhile Punjab Tractors Limited) from the public and Shareholders as at 31st March, 2009, 190 deposits amounting to Rs.37.46 lakhs had matured and had not been claimed as at the end of the financial year. Since then, 37 of these deposits of the value of Rs.9.32 lakhs have been claimed. The particulars of loans/advances and investment in its own shares by listed companies, their subsidiaries, associates, etc., required to be disclosed in the Annual Accounts of the Company pursuant to Clause 32 of the Listing Agreement are furnished separately. Current Year During the period 1st April, 2009 to 27th May, 2009, 35,335 vehicles were produced as against 32,512 vehicles and 33,578 vehicles were dispatched as against 32,214 vehicles during the corresponding period in the last year. During the same period 24,420 tractors (including Swaraj Division) were produced and 23,816 tractors (including Swaraj Division) dispatched as against 15,834 tractors produced and 15,639 tractors dispatched during the corresponding period in the previous year.

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The financial crisis that hit the developed world in September last year has impacted economic growth across the globe. Manufacturing activities in the country have been hit particularly sharply by the meltdown in global financial and trade flows. However, the growth in motor vehicle sales in March and April, rise in PMI index for India to level above 50 in April and the installation of a proreform and stable Government ushered in by the recent elections augur well for a recovery of the economy in the near term. Given your Companys continuous focus on quality, cost controls, process efficiencies and new product developments and innovations, your Company is poised to quickly take advantage of the expected positive turn of events and hopes to cope with these challenges and looks to the future with confidence. Acquisitions and other matters Your Company continued its policy of organic and inorganic growth encompassing key Sectors of your Company and concentrated on consolidating its position in various spheres of its business. During the financial year 2009, assignments across all the transaction categories were successfully executed. Some of the prominent illustrative transactions in the financial year 2009 are enumerated as under: 1. Acquisition of Assets in 2 Wheeler Segment: In line with your Companys policy of striving to be a key player in the "Entire Value Chain", your Company has made its maiden foray in the 2 Wheeler Segment by acquiring the assets of Kinetic Motor Company Limited (KMCL). This acquisition has provided an additional touch-point for consumers to interact and bond with the ever-expanding Mahindra Universe of products and services thereby allowing the Company to build relationships with customers at a relatively early stage in the `personal transport solutions value chain. This should enable the Company to extend itself into a large market adjacent to the existing business, leveraging on its strong corporate brand name, and distribution network in small towns /rural areas, manufacturing and sourcing capabilities, strong relationships with dealers and by providing consumer finance through Mahindra & Mahindra Financial Services Limited. This acquisition gives your Company an optimal strategic fit for a quick and low cost market entry. It also provides an access to flexible assembly, manufacturing and R&D facilities, reputed technical collaborations for launching new products with short lead times. This acquisition has been completed in November, 2008 and the facilities have now become operational. 2. Acquisition of Engines Engineering, Italy (EE): In line with the "Design to Delivery" policy of Systech Sector, your Company has acquired a prominent two wheeler design company in Italy. EE provides a `One Stop Solution in the form of conception, design, styling, on-line assembly, industrialization and marketing. Some of the most prestigious names that are associated with EE are Benelli, Beta, Ducati, Gilera, Honda, LEM, Malaguti and Yamaha. EE is the first ever company to introduce plastic components in Scooters and is a known name in motorcycle racing competitions in 125 GP Class. It has a strong cohesive highly skilled people and most of them having spent their entire professional life with EE. This acquisition provides an entry into the two wheeler design capability, generating additional revenue through a European face and benefits your Company with aggressive off-shoring of work. Besides improving the utilization process, it would also enhance competencies of Mahindra Engineering Services Limited through knowledge transfer. EE has an unparalleled expertise in the two wheeler domain which can be explored to open up a two Wheeler design center in India. 3. Consolidation of Gear Business: a) Acquisition of Metalcastello, Italy: One of the key pillars of the Systech Sector strategy is to have a Global presence in Gear space. In

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order to enhance its presence in this space and expand its global footprints in automotive components manufacturing, your Company has during the year acquired Metalcastello S.p.A. (M C), a Gear manufacturing company in Italy. Metalcastello fits strategically well in the overall Gears business vision and complements the Companys current portfolio. This acquisition would allow the Company to exploit potential synergies between operations of Mahindra Gears & Transmissions Private Limited, M C and Crest Geartech Private Limited which is a subsidiary of M C at Faridabad. It will also allow the Companys Systech Sector to gain access to international markets and customers in Automotive / Automotive Component Industry specifically in the Gears segment. In order to conserve financial resources and utilize them over a larger canvas for the Gears domain, your Company has strategically tied up with ICICI Venture Fund, a private equity fund which has co-invested in this space. Your Company through its subsidiaries has an effective economic interest of 51% in M C, with ICICI Venture holding 44.61% and the M C Management holding a minority stake of 4.39%. b) Increase in stake in Mahindra Gears & Transmissions Private Limited (MGTPL) (formerly known as Mahindra SAR Transmission Private Limited): Your Company bought out the minority Shareholders stake of 39.74% from SAR Auto Products Limited thus making MGTPL a wholly owned subsidiary of the Company. This increase in stake would facilitate the consolidation and alignment of the Systech Sectors Indian Gear businesses with that of the recently acquired Metalcastello S.p.A. in Italy. 4. Acquisition of Tractor Company in China: With a view to further consolidate the Companys presence in China, being one of the top three tractor markets, your Companys Farm Equipment Sector has formed a Joint Venture viz. Mahindra Yueda (Yancheng) Tractor Company Limited (JV) in China with Jiangsu Yueda Yancheng Tractor Manufacturing Co. Ltd. (Yancheng Tractor), a leading Chinese tractor manufacturer. Yancheng Tractors Huanghai Jinma brand is the No. 4 tractor brand in China in terms of tractor volumes in 2008. Your Company holds 51% in the JV through its wholly owned subsidiary, Mahindra Overseas Investment Company (Mauritius) Limited (MOICML) and all the tractor related assets and current liabilities of Yancheng Tractor have been transferred to the JV. With this acquisition, your Company will have a wide product range from 16HP to 125HP, a large manufacturing base which will be used to produce tractors for the domestic market in addition to low cost tractors for exports, considering that Yancheng Tractor is also a leading exporter of tractors from China, with a footprint in more than 60 countries including the USA, South America, Russia, Europe and Africa. The combined distribution network of both the operations (including the 1st acquisition made by the Company in China) will give your Company a much larger presence in the Chinese market. 5. Merger of Punjab Tractors Limited (PTL): Pursuant to the acquisition of PTL in the financial year 2008 and in order to reap the benefits and consolidate the tractor business, it was decided to merge PTL into your Company. The amalgamation of PTL with your Company has inter alia lead to cost savings, achieving economies of scale, sourcing benefits, vendor rationalisation, more focused operational efforts, simplification of business processes, productivity improvements and putting cash resources to optimal use. Above all, this has strengthened your Companys leadership in the industry, in terms of its asset base, revenues, product range, production volumes, brand consolidation and market share. The amalgamated entity has benefited from improved organizational capability and leadership, arising from the combination of people from PTL thereby giving it an edge in an increasingly competitive industry. This merger was effected pursuant to a Scheme of Amalgamation which was approved by the Shareholders at the Court Convened Meetings of your Company and PTL respectively and the merger has been approved by the Honorable High Court of Judicature at Bombay and Honorable

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High Court of Punjab & Haryana. The Appointed Date for the merger was 1st August, 2008 and the merger became effective from 16th February, 2009. 6. Private Equity in the Automobile After Market Segment: With a view to providing consumers a wide choice of good quality used cars through trust and transparency, your Company has forayed into the After Market Segment. For funding its growth plans which inter- alia include the opening of owned Superstores, further developing its Franchisee network and expanding into newer cities, your Company has obtained equity infusion from a PE, namely PHI Management Solutions Private Limited to the extent of 31.58% in Mahindra First Choice Wheels Limited. This business vertical will consolidate your Companys multi-brand service chain Mahindra First Choice Services Limited, along with its pre-owned vehicles business, Mahindra First Choice Wheels Limited and Mahindra Spares Business. 7. Merger of Mahindra Holdings & Finance Limited ("MHFL"): As mentioned in the last years Directors Report, in order to simplify and consolidate the Group holding structure, your Company decided to merge its wholly owned subsidiary MHFL into your Company. This amalgamation has benefited both the companies and their stakeholders on account of enhanced financial strength and capability. In addition, the proposed Scheme has enhanced your Companys financial strength and has resulted in higher Shareholder value creation and distribution. The proposed Scheme was approved by the Shareholders at a Court Convened Meeting held on 12th April, 2008. The Appointed Date for this Merger was 1st February, 2008 and became effective from 11th August, 2008. 8. Transfer of Logistics Business: In order to focus on and accelerate the growth of the Logistics Business of your Company, it was decided to transfer this Business (formerly known as the Transport Solutions Group) into a wholly owned subsidiary by the name of Mahindra Logistics Limited ("MLL"). This transfer was approved by the Shareholders under section 293(1)(a) of the Companies Act, 1956 through a Postal Ballot on 28th July, 2005. Pursuant to this, the Company entered into a Business Transfer Agreement in September, 2008 with MLL in order to enable such transfer of its Logistics Business to MLL. 9. Automotive Sector Joint Venture in Australia: In line with the Automotive Sectors aspirations to be a global player in the SUV and Pick-up vehicle segments, your Company decided to foray into the Australian market in 2007. Your Company through its newly formed Australian subsidiary, Mahindra Automotive Australia Pty. Limited ("MAAPL") has taken over Distributorship of vehicles in Australia from TMI Pacific Pty. Ltd. TMI continues to be a partner in MAAPL with a 20% stake with the balance 80% being held by your Company. Your Companys foray in this space is a definitive step in its strategy to grow and position itself as a Global Automotive OEM in Australia. 10. Mahindra South Africa: Mahindra and Mahindra South Africa (Proprietary) Limited ("MSA") was formed as a subsidiary of the Company with a 51% stake and the remaining 49% stake held by African Automotive Investment Corporation ("AAIC"), a South African company. In order to grow in this line of business, your Company has decided to buy out the stake of AAIC and also to infuse suitable funds in the near future. 11. Proposed Merger of Mahindra Hinoday Industries Limited ("MHIL") with Mahindra Castings Private Limited ("MCPL"):

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In order to consolidate the activities and optimize from the benefits of synergy, MHIL and MCPL

have filed respective petitions to the Honorable High Court of Judicature at Bombay for sanctioning of the Scheme of Amalgamation of MHIL with MCPL and their respective Shareholders ("the Scheme"). In terms of the Scheme, the Appointed Date for the Amalgamation is 1st April, 2008. The Scheme is awaiting sanction by the Honorable High Court of Judicature at Bombay. Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo Particulars required to be disclosed under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are set out in Annexure II to this Report. Particulars of Employees The Company had 315 employees who were in receipt of remuneration of not less than Rs.24,00,000 during the year ended 31st March, 2009 or not less than Rs.2,00,000 per month during any part of the said year. However, as per the provisions of section 219(1)(b)(iv) of the Companies Act, 1956, the Directors Report and Accounts are being sent to all the Shareholders of the Company excluding the Statement of particulars of employees. Any Shareholder interested in obtaining a copy of the Statement may write to the Company Secretary of the Company.

For and on behalf of the Board KESHUB MAHINDRA Chairman Mumbai, 28th May, 2009

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CHAPTER VIII

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RECOMMONDATION
 As Mahindra tractor has decided to go number 1 position in world by 2005. I recommend company to take up marketing seriously and also of international sub-standards or techniques.

To keep high thinking & foresightness to go no. in the world.

It should not also forget about the competition combined in India.

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CONCLUTION

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CONCLUTION

India is one of the major players in automobile manufacturing as compared to the other countries.

As far as India is concerned it is a major player world tractor manufacturing industry & is considered as second largest.

Mahindra tractor is the third largest player in world, number 1 is of FORD tractors. Mahindra & Mahindra is as old as Indian Independence and Mahindra Tractors has been into strongest position in India capturing 33% market share. It has a target to be at no. 1 position by 2005. This company has been into continuous product development and has rolled out various models.

To achieve this above target company is into aggressive marketing and has to gear up its model configuration more seriously, though Mahindra has its good product portfolio. Products for types of land, conditions.

Mahindra has always kept its foresightness, due to which company is a market leader. Mahindra claims that every fourth farmer has Mahindra tractor. Mahindra

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always believes in slow & steady wins the race. Company takes each & every customer seriously & look forward till the customer is satisfied.

Mahindra tractors has good financial records having a turnover of around 1,000 crores. This company is in strong financial position. At the same time share holders of this company is increasing & people have full faith on product & the company as well.

Mahindra has always believed and has a strong faith and trust on employees working. This company is supposed to be one of the best pay masters of India; with beautifully designed salary and wage structure has made its employees loyal and enthusiastic to work for organization. It also believes in welfare of their employees and thus makes them focused towards work. In one line, Mahindra & Mahindra is one of the ideal company which has all the qualities to be at no. 1.

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BIBLIOGRAPHY

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BIBLIOGRAPHY

PERIODICALS AND MAGAZINES:  Finance India, Journal  Business world  Annual Report of Mahindra & Mahindra ltd..
JOURNALS:  Times of India  Hindustan times BOOKS:
 Harry I. Wolk, James L. Dodd, Michael G. Tearney. Accounting Theory: Conceptual Issues in a

Political and Economic Environment (2004). ISBN 0324186231.

 Angelico A. Groppelli, Ehsan Nikbakht. Finance (2000). ISBN 0764112759.  Barry J. Epstein, Eva K. Jermakowicz. Interpretation and Application of International Financial

Reporting Standards (2007). ISBN 9780471798231.

 Jan R. Williams, Susan F. Haka, Mark S. Bettner, Joseph V. Carcello. Financial & Managerial

Accounting (2008). ISBN 9780072996500.  ^ abHelfert, Erich A. (2001). "The Nature of Financial Statements: The Cash Flow Statement". Financial Analysis - Tools and Techniques - A Guide for Managers. McGraw-Hill. p. 42. doi:10.1036/0071395415.  ^Bodie, Zane; Alex Kane and Alan J. Marcus (2004). Essentials of Investments, 5th ed. McGrawHill Irwin. pp. 455. ISBN 0072510773.  ^Epstein, Barry J.; Eva K. Jermakowicz (2007). Interpretation and Application of International Financial Reporting Standards. John Wiley & Sons. pp. 91 97. ISBN 9780471798231  Williams, Jan R.; Susan F. Haka, Mark S. Bettner, Joseph V. Carcello (2008). Financial & Managerial Accounting. McGraw-Hill Irwin. pp. 40. ISBN 9780072996500.  ^Daniels, Mortimer (1980). Corporation Financial Statements. New York: New York : Arno Press. pp. 13 14. ISBN 0405135149

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WEBSITES

 www.m&m.org.in
 www.google.co.in  Other related websites.  www.smconline.com  www.nseindia.com  www.kotak.com  www.bseindia.com

THE END

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